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August 15, 2011

Google Buys Motorola

Google found a way to solve the problem of Android patents and it's only three times more expensive than acquiring the Nortel patents: buying Motorola for $12.5 billion.

"Motorola has a history of over 80 years of innovation in communications technology and products, and in the development of intellectual property, which have helped drive the remarkable revolution in mobile computing we are all enjoying today. (...) In 2008, Motorola bet big on Android as the sole operating system across all of its smartphone devices. It was a smart bet and we're thrilled at the success they've achieved so far," says Google's CEO, Larry Page.

A few days ago, Motorola's CEO said that the company owns "one of the strongest and most respected patent portfolios in the industry. We have over 17,000 patents granted and over 7,000 patents pending with particular strength in 2G and 3G essential, non-essential patents important to the delivery of competitive products in the marketplace, video particularly compression, decompression and security technologies and finally, a leading position in 4G LTE essential." Sanjay Jha also said that IP was important to differentiate from other Android vendors. It's clear that Motorola didn't want to license its technology to other Android OEMs, so Google's solution was to buy Motorola.

Samsung, HTC, Sony Ericsson and LG had a unanimous reaction. "We welcome Google's commitment to defending Android and its partners." After all, it's Google who created the software, so Google has to spend $12.5 billion to solve the mess.

Google promises that Android will continue to be an open platform, but the other Android OEMs will have their reasons to doubt. Google's biggest acquisition to date could be an answer to Android's problems, but also the beginning of the end for Android as an open-source mobile operating system. Motorola released two of the most important Android devices (the original Droid and the XOOM tablet) and Android smartphones saved it from bankruptcy, but Motorola is a US company that can't compete outside of US and it doesn't have a good track record when it comes to releasing the latest software updates. Buying this company to save the Android ecosystem will only work if Motorola disappears.

Update. An interesting quote from Motorola's CEO (June 2011): "I expect consolidation to occur. Our customers are consolidating, and our supply base is also consolidating. But my view is that consolidation occurs in some interesting ways. I'm not convinced that handset manufacturers acquiring other manufacturers is the best way for value to be created for shareholders. Consolidation across content manufacturers and hardware and software manufacturers -- I see a bunch of different ways for this consolidation to occur, to create shareholder value and create different structures to the industry. You've already seen the acquisition of Palm by HP, a very interesting acquisition that brought software and hardware assets together. The relationship between Microsoft and Nokia also speaks to that. Do we expect Motorola to be an independent company? I don't know yet. I hope very much that we are."

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