Google Buys Motorola, Changes The Game

by Chris Silva

The news outlets have been abuzz today with the news that Google is acquiring Motorola’s handset business for $12.5Billion. The question on everyone’s mind is what this move between two major players in the space means for the future of mobile as we know it. I’ve got some opinions and I’m interested in yours, too.

Here’s how I see this playing out – a  detailed outline of the first item is available on my blog:

  • This is an ecosystem play: Taking on a hardware company, Google isn’t trying to get into a business that its first foray into was, well, less than stellar. This isn’t about selling more elements in the mobile supply chain, this is about moving Android into an experience sale. Through its mobile apps and services consumable on mobile, its Android OS to run mobile devices, Google has had 2/3 of the mobile picture in its portfolio but was lacking control over platform consistency to make sure it all “just works.” Consumers – and especially businesses – don’t want to buy a phone, they want to buy an ecosystem of services and hardware tools that work in concert. Google will gain the missing piece in Motorola.
  • Patents matter: Some of the comments I’ve been hearing around mobile lately have been speculating about how much damage Google losing a major patent bid will have on its business. Taking on the handset business of Motorola, Google gains some ground in the patent space allowing it to head-off potential hurdles in creating devices that matter to enterprises and consumers without as much concern for being stopped in its tracks, a tactic we’ve seen more of in the mobile space of late.
  • It’s not just about smartphones: Remember the launch of Google TV and how it was supposed to change the way the family gathered in the living room? Yeah, I haven’t seen that yet, either. Some companies – like Boxee and Roku – have had outsized success in penetrating the entertainment center, but that’s largely because they had a baseline of 0 users and are small firms. In order for Google to penetrate the living room – and hopefully they’ll come up with a better strategic slogan – they need a channel. Go look at your cable box… chances are that it’s got a Motorola logo on it. Motorola Mobility “…includes set tops and data access devices.” Now, Google’s massive video warehouse and its store of data on user preferences has a channel to the television. Not a minor asset in this deal.

So what happens? If the market is lucky and the marriage goes well, I expect we’ll see some good, use-case marketed Android offerings come along, something lacking in a space where the major competing product is a lifestyle sale not based on cores, speeds and displays. Patent squabbles resume their rightful place in the backseat, putting innovation back at the helm of this still-emerging space and GoogleTV gets another bite at the consumer apple, just in time for AppleTV to start getting interesting on its own, I surmise. Google has pledged to continue supporting other players in the Android platform world, however, it’s not about Google supporting them, it’s about them supporting Google as component OEMs, a difficult future to see if Google/Motorola start to steal market share.

How does this announcement change things for you, do you wait it out, buy with confidence or shift allegiances? Let us know in the comments!

Comments

  1. Chris, I see an obvious channel conflict this acquisition creates in the Android ecosystem. Android got to the no. 2 spot thanks to partners like HTC and Samsung. I think these guys are surely concerned about this development. I bet Samsung is going to spend more $s to enhance Bada. Do you think this is an indication that $AAPL had it right – mobile eco-system has to be cohesive & strong players have to be vertically integrated?

    • It will definitely be interesting to see how the competitor picture plays out among other Android handset makers and whether they do, in fact, act competitive. I am not sure that running to a new platform is the answer for anyone in this 3-4 horse race, though.

      As for the question of whether Apple “had it right” I think Apple entered the handset market using a strategy they’d seen work in the portable media player market and it panned out. Their success, in many ways, define the “go to” strategy of providing more than just a handset, which is a challenge to traditional mobile vendors who look at individual models and a distant buyer/seller relationship due to the complexity of their channel. Keep in mind Apple’s success was defined in large part by the flexibility they were given from their first carrier partners, in stark contrast to that shown to folks like RIM who live and die by carrier decisions, sometimes to the detriment of their final product.

  2. I think that the Chromebook’s poor reception may also have played a role. In the Cloud world, especially the aspiring leader should have a whole ecosystem to assure degrees of control.

    • A fair point, perhaps the direct success of Chromebooks contributed to the awakening to the need for this sort of buy, but I tend to think of that line of strategy as a bit of a science experiment for Google. Of course, so was the launch of the Nexus One when they went down that path a few years back.

  3. I think you’re spot on about managing how their software is implemented so that it ‘just works’. That’s the trouble with open source, people can break it, or just not do it justice. Even with their ‘nexus’ phones, they still don’t have complete control. With the manufacturer working purely towards android devices, they can start from the ground up

    • Exactly, hardware tied directly to software from the ground-up should beget a more solid Android experience. I think that this has a bit to do, too, with the push for Android At Home and the rise of non-mobile “smart” devices. It may start with the set top box where Moto can lend some expertise but will extend far beyond. Those will be some busy engineers!

  4. Simply desire to say your article is as surprising. The clarity on your post is simply spectacular and that i can suppose you’re knowledgeable on this subject. Fine together with your permission let me to snatch your feed to stay up to date with drawing close post. Thanks one million and please keep up the enjoyable work.|