In the world of tradeable Mobile Assets, having Android run on Samsung's full line of devices and tablets is worth more than the roughly $10B write down that Google (NASDAQ:GOOG) took in unloading its Motorola hardware group onto Lenovo. It was a necessary move to enable Android to become relevant as a high end and corporate ecosystem. Without Samsung(OTC:OTC:SSNLF), Android rattles around in lower cost consumer devices and weakens Google's attempt to be a credible alternative to Microsoft (NASDAQ:MSFT) and Apple (NASDAQ:AAPL) in the lucrative corporate world where legacy PCs are declining at the expense of smartphones and tablets. It also appears that Intel (NASDAQ:INTC), without a software ecosystem partner falls further behind.
Google's acquisition of Motorola was to provide some IP protection and to be an early delivery vehicle for the latest Android release. The mismanagement of Motorola was always in the cards as it is possible Microsoft may do the same to Nokia. Samsung opted to play its Tizen O/S card as a way to show dissatisfaction, however the reality is that they both need each other as Google's monetization only works on devices that go to real paying customers at the mid range and high end of the market. The millions of cheap Android phones sold in China and India may build future customers but don't add to the bottom line now.
Microsoft has wrestled with both its software business model and its hardware delivery mechanism over the past two years. It is clear that they still need Dell and HP (NYSE:HPQ) to sell PCs and tablets into corporate since they are so cost effective and they do so without any margin hit to Redmond's bottom line. Furthermore the price erosion in the legacy PC market is more likely to come out of Intel's hide than their own. Add on top that Microsoft is seeing success in their Office yearly subscription model and you get another view into how Software inevitably rules the world.
Apple would obviously rather see a fractured Google Android O/S full of security holes roaming the world and not a refocused company looking to clean up its software for a corporate push and an advanced 64 bit O/S. By the end of 2014 it will be a complete 64 bit world with three ecosystem competitors or teams with Apple the only one building both.
With Paul Otellini, the former Intel CEO still on Google's board, you have to wonder if he knew of strategies coming down the pipe that would negatively impact his former company. First there is word of Google working on 64 bit ARM (NASDAQ:ARMH) server chips that would undercut Intel XEONs by thousands of dollars and now a closer alliance between Samsung and Google that is primarily going to be based on Operating System drops that are more tuned for ARM than x86 Atoms.
With Apple looking to build a larger iPad Air with a 12.9" screen based on ARM in order to draw corporate away from x86 PCs, than can we not conjecture that Google and Samsung will drive towards more advanced chromebooks based on a new arsenal of 64 bit ARM chips. Ditto for Microsoft. Intel is not front and center with any of these major OEMs on a processor that is ready to compete. 14nm can't be soon enough!
Disclosure: I am long AAPL. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.