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Yesterday every publication covered the announcement that Google was acquiring Motorola Mobility for $12.5 billion. The original announcement on Business wire is here. My thoughts on the acquisition follow.
- Asian cell phone manufacturers will not like the transaction. Therefore, I expect HTC, Samsung and LG (to name a few) all to react negatively to the acquisition and begin efforts to explore alternatives to the Android operating system. Given that Asia is the largest market for cell phones, moves away from Android by these leading Asian cell phone companies cannot be good for Google. It may take some time, but expect phones from these leading manufacturers with alternative OS.
- Buy versus build is questionable. Whenever one does an acquisition one should consider whether there is a cheaper alternative. In looking at Motorola, what does one get? A weak brand, uninspiring design expertise, a history of technological innovation that stopped in about 2000 and a worldwide distribution network. Seems like a lot of money for a distribution channel.
- It looks like WINTEL all over again. Having single handedly destroyed this monopoly with Android, it looks like they are making the same mistake. Yes--Android will remain open source, but see my first bullet point.
- Are they trying to be Apple? While Apple has enjoyed great success on many platforms with a combination of proprietary hardware and software, Google's strength has always been with the ultimate low cost strategy--free. I do not see how this acquisition plays to a repeat of a low cost strategy with free products.
- Is this another error in China? Google has struggled in China and I do not see how this strategy helps them gain market share there for any of their products. It may very well trigger a move away from Google by all the second and third tier phone and tablet marketers there in favor of home grown alternatives.
Bottom line I do not see the logic for the acquisition of Motorola. I think the acquisition will encourage much more competition in the operating system space, as I described here. Also, I think that it could weaken their position in search even further in China and perhaps in other markets.
Maybe we should all hope for Microsoft to make a better offer to acquire Motorola, but I do not think that is likely. Microsoft was shopping for a phone company earlier this year and probably looked at Motorola and passed. If even Microsoft passed on the acquisition, what was Google thinking.
After the original post, someone contacted me and said the acquisition was a patent portfolio acquisition, in response perhaps to Google's losing bid for Nortel. Seems like a lot of capital for patents but the comparative cost is similar to the pricing on the Nortel portfolio when one adjusts for the larger number of Motorola patents.