By Justin Dove
On the surface, Google’s (NYSE: GOOG) $12.5-billion acquisition of Motorola Mobility (NYSE: MMI) seems like an attack on Apple (Nasdaq: AAPL). After all, Apple dealt a strong blow to Android and Google over Nortel patents. In June Apple led a consortium of companies, including Microsoft (Nasdaq: MSFT), Sony (NYSE: SNE) and Research in Motion (Nasdaq: RIMM) to outbid Google for Nortel Network’s 6,000-plus patent portfolio.
Obviously Apple feels threatened by Android’s quick saturation. Google increased its Android market share from 17 percent of smartphone sales in Q2 of 2010 to 43.4 percent in Q2 of 2011. The ubiquity of the Android platform is strikingly similar to the strategy that Microsoft used to dominate Apple in the PC-era. It’s possible Apple feels haunted by déjà vu.
And there’s certainly an air of desperation in recent moves by Apple to block sales of Android-based Samsung (GM:SSNLF) and Motorola tablets in Europe. According to reports, Apple’s copyright claims are based on the rectangular shape of the tablet rather than utility.
Google Getting Desperate Too
As the graphic below outlines, Google had 37 patent disputes related to Android as of March 2010. With even more patents recently being swooped up by Apple’s consortium, Google has to be feeling the pressure.
Adding to the pressure were statements from a quarterly earnings conference call by Motorola Mobility CEO Sanjay Jha last month. Activist investor Carl Icahn filed a 13D in July, requesting that Motorola seek to monetarily benefit from its 17,000-plus patent portfolio.
Jha appeared to coincide with Icahn’s request in these statements:
That (IP royalty) number has come down over the years as a result of licenses that have expired… As we go forward, I think that the introduction of a number of players with large revenues, which have come into the marketplace as a result of the convergence of the mobility, computing, internet and other segments… creates an opportunity for us to monetize and maximize the shareholder value in a number of different ways and we evaluate all of them all the time.
The italicized portion of these statements seems to precisely describe Google. It’s arguable if Jha was truly threatening Google with possible lawsuits in these statements, but it’s a possibility.
Google’s Move Seems Defensive
There are certainly some advantages gained by Google acquiring Motorola. They have ensured a manufacturer to deliver the Android platform and will improve upon the uninspiring Nexus One project. Motorola also has a very successful division in set-top cable boxes. This may help Google in its recent endeavors in the television markets.
But there are also some glaring downsides hinting that the move was defensive. Google will now be competing against some of its main Android customers in Samsung and HTC. Those companies can’t be too thrilled about that.
The acceptance of this great risk indicates Google’s acquisition was more defensive in terms of securing patents and avoiding more lawsuits. It's possible Google could use synergy with Motorola to compete directly with iPhone. The problem would be that if Google was able to churn out an innovative iPhone competitor, the other Android companies would likely rebel.
Will Microsoft Try to Keep Up?
If Google’s acquisition backfires, and companies like Samsung and HTC rebel, an obvious benefactor might be Microsoft. Companies will likely give Windows Phone a harder look in order to avoid sleeping with the enemy.
The stocks for Nokia (NYSE: NOK) and Research in Motion jumped on Monday with rumors they may also get gobbled up by the likes of Microsoft or Google. While Google may decide to take over Nokia to implement Android over Windows Phone, a Microsoft acquisition seems counterproductive. Microsoft likely stands to benefit because it doesn’t own manufacturing interests. It wouldn’t make sense for them to hurt that advantage.
There is no way this is a purely offensive move by Google. It looks more like it’s defending against the onslaught of patent infringements and possible future ones from Motorola.
The move could seriously hurt them if they lose the biggest Android customers in Samsung and HTC. It could also help the enemy in Microsoft. Time will tell.
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