Google announces it's intentions to acquire Motorola for $12.5 billion and the blogosphere collectively takes a great big dump. Financial blogs and websites are crowing about the price and the subsequent drop in Google's market cap, while blogs that tend to see the world through Apple shaped glasses are talking about how "evil" Google is or how this is a such a dick move. I'm not going to post links to these musings as I'm not in the mood to hand out page views. You won't have to look very far to find some of it for yourself.
The Mobile Industry Reaction
The mobile industry hasn't cut any corners in commenting on the bombshell either. The new Nokia CEO had this to say:
"If I happened to be someone who was an Android manufacturer or an operator, or anyone with a stake in that environment, I would be picking up my phone and calling certain executives at Google and say 'I see signs of danger ahead,'" Nokia CEO Stephen ElopAdvertisement
He also said something about how wonderful the opportunity is with Windows Phone 7 and how lush and green the grass is over on the WinPhone side. I didn't see him mention that WinPhone 7 market share has actually been in decline since release, but I didn't look that closely.
Now, this Elop guy went from Microsoft to Nokia just before, conveniently enough, Microsoft paid Nokia $2 billion to abandon whatever dead-end mobile OS they were using in favor of Windows Phone 7. I, for one, don't find it unusual at all that he would make such a stand.
There was also this little quote from Apple CFO Peter Oppenheimer:
"$12.5 billion is a lot of money."
Keep this one thing in mind; Apple has never done a huge acquisition. They have $80 billion in the bank and seem intent on sitting on that stack of cash until the paper rots. I'm not going to research this but the Nortel patent auction at a $2 billion contribution might be the most money that Apple has ever spent to do any deal since the $450 million buyout of Next over 10 years ago. Yes Pete, $12.5 billion is a LOT of money, but what's that to you?
What if it was just about patents?
If Google bought Motorola primarily to get their paws on the massive pile of Moto patents then none of this discussion matters. Google will use those patent missiles as the foundation of a policy of mutually assured patent destruction against Microsoft and Apple and continues their patent buys to build on this foundation. If this was the only motivation for the buy it would also be a little egg on the face of the Rock Star group that won the Nortel auction.
Apple didn't need those patents and Microsoft already had license to use them. The Motorola patents in the mobile space are seen by almost all as being much more valuable than the Nortel patents were, so that would be $4.5 billion wasted Rock Star dollars.
What if it was about Google TV?
Well, I'm certain that Google TV will benefit from this, but this $12.5 billion dollar buy is not about Google TV. Motorola is the largest STB (set top box) manufacturer for cable TV providers, but that really is meaningless for Google TV. In the weeks that I have had my Logitech Revue I have come to appreciate what it adds to my DirecTV subscription, but Motorola is no guarantee that the bassackwards, controlling cable monopoly operators will adopt Google TV on their STB's with open arms.
If Google TV is to benefit from this deal at all it will be from a Motorola designed and manufactured standalone Google TV STB that is functional, affordable and is used in conjunction with the God-awful STB that you get from your cable company.
Enter the Android licensees
What about the girls that didn't get a date to the prom? You know, Samsung, HTC and LG. What happens with them? Well, if you listen to
Microsoft Nokia executive Elop, they should flee the favored relationship between Google and Motorola for Windows Phone, a newish OS that has actually delivered declines in market share for Microsoft since release. Of course, this totally ignores the fact that MS shoved $2 billion in the pockets of Nokia to hop on the sinking ship. I call that a favored relationship that's out in the open for all to see.
So Windows Phone is out. What else is there?
Thanks to Leo Apotheker and HP, webOS is available. If the rumors are to be believed HP would like to find a single company to license the OS for their hardware. I'm not going to talk about how inept HP has been since their Palm buy, I'll just say this to Samsung, HTC and LG; Palm failed with webOS and HP failed webOS.
There are thousands of consumers who have been burned by webOS. Twice. There are no apps and there isn't any hint that major developers were working on webOS versions of their apps. Are any of the licensees in the mood to begin again at the beginning with webOS? I wish, but I don't think so.
In short, there is absolutely nowhere for Samsung, HTC, LG or any of the other Android licensees to go. For now. Samsung has Bada. HTC could license or buy webOS. LG and the other small players could slug it out in the Windows Phone cesspool with Nokia. For now, they'll continue to ship their Android devices because they don't have any other real alternative.
Sidebar – I'm not pleased that webOS is gone
I am totally pissed about the whole webOS thing with HP. My main phone is my HTC Thunderbolt, but my second phone and mobile hotspot is a VZW Palm Pre+. As is very common among past webOS device owners, I love the OS but totally hate the hardware. HP was supposed to fix that when then CEO Mark Hurd bought Palm. When he got caught with his pants around his ankles we got Leo, and the rest is webOS history.
What if it's really about Google branded phones?
It would be interesting if the Android licensees flee to something else, or at the very least change their focus to another option, but that might just be Google's end game here. Each one of these licensees has a product road map that is measured in years, not months. Sammy isn't busy dreaming up phones to deliver this December, they're already thinking about next December.
Walking away from Android would take time as each manufacturer would very likely continue to release the Android phones on their road map while internally they ramped up for an OS change. Time that Google would need to ramp up their own in-house devices. Just know this; if Google does intend to go the vertically integrated Apple path, those plans are already in high gear.
My take on the $12.5 billion Motorola buyout
There is no question in my mind that in the next year or two you will see Google branded devices from what will become the former Motorola. Phones and tables that don't have that stylized M logo on them, but instead bear the Google badge. An entire line of Google benchmark devices that all other licensees will have to contend and compete with. It's a possibility that I'm certain has the Android licensees both worried and on the lookout for options.
Android was a reaction to a Google problem that we didn't even realize existed at the time that Android was bought. Larry Page, Google CEO, knew in 2005 when he did the deal for Android that if Google didn't have a presence in mobile they faced the very likely threat of being shut out of the future of the Internet. It was a brilliant move to buy Android, but what if that wasn't the end game?
Apple sells fewer iOS devices than every Android licensee individually, but they make more profit than every Android licensee combined in the mobile space. Is it evil for Google to want a slice of that vertical integration pie? I think not. It's OK for RIM and Apple, why is it so wrong for Google?
To be clear, if/when Google drops the official Google phone and tablet line things will change forever. Carrier relationships will have to be rebuilt and there will be a period of somewhat rebuilding the sales volume, but in the long-term having total control of Android from OS to hardware would be the ultimate Android wet dream. And that type of profitable, vertical integration might be exactly what Google had in mind when they spent $12.5 billion in cash to get their hands on Motorola.
But what if the carriers drop Android too?
Again, drop Android in favor of what? Total Apple dominance? I doubt it. But maybe.
The next Google target just might be to buy T-Mobile. I know, I know. Hang in there for just a second. It's really looking more and more like the AT&T deal is going to be shot down. That would put T-Mobile right back on the market and it won't take anywhere near $38 billion for the next bidder to buy the business. Google could approach Deutsch Telecom with a joint venture idea that would see a majority owned Google wireless service to counter any loss of carrier interest in the new Android, and to actually encourage VZW, Sprint and AT&T to continue selling Android devices to prevent a loss of post-paid customers to G-Mobile.
If they did buy T-Mobile, Google would control the OS, the hardware, the wireless network and the wired network that connects your home to the Internet if they chose to expand their FTTH initiative beyond Kansas City and Palo Alto. OS control, phone and tablet control, mobile delivery control and home delivery control.
Far fetched? Oh, hell yes. But how many of you expected Google to buy Motorola?
Will Google abandon the Motorola brand in favor of Google branded devices? God, I hope so. If they do, it might only be the beginning.