Google's Balancing Act In Motorola Deal



Google’s planned purchase of Motorola Mobility could benefit both companies, potentially drive Android OS improvements, and help protect handset vendors that license the OS from patent-infringement suits, multiple analysts said.

But many of the gains depend on the Internet giant’s ability to manage its Motorola relationship without alienating handset vendors that currently license Google’s Android OS and compete with Motorola for smartphone market share, analysts noted.

Google expects to complete the transaction by the end of this year or early next, pending regulatory approval.

Money-losing Motorola Mobility will benefit from Google’s financial strength, which could be applied to building the handset maker’s distribution outside the U.S., analysts said. Motorola ranked sixth in global smartphone market share in the second quarter, according to IHS iSuppli.

For its part, Google will be able to use thousands of Motorola mobile-phone patents to threaten retaliation against smartphone-OS rivals Apple and Microsoft, potentially dissuading them from lodging any more patent-infringement actions against Google’s Android licensees. “Android will be more protected,” IDC analyst Ramon Llamas told TWICE.

“From an intellectual property (IP) standpoint, the acquisition bolsters Google’s negotiating position with Apple in the event that Apple goes after Androidbased products the same way it did with Samsung in Europe,” added Francis Sideco, IHS’s wireless communications principal analyst. “If nothing else, Google will be able to assert Motorola’s IP for the 3GPP and 3GPP2 cellphone specifications, which are used in both the iPhone and iPad.”

To improve Android’s capabilities, Google and Motorola could work together to develop smartphones as iconic as the iPhone with software and hardware that is as tightly integrated as it is in iPhone, said SNL Kagan senior analyst Sharon Armbrust. Alternately, Google and Motorola could develop hardware reference designs that other handset vendors could adopt to improve the user experience. “Android’s potential as a write-once run everywhere OS has not been realized due to the variety of handset configurations available,” Armbrust said.

“Apple’s products have a reputation for ‘just working,’ and full hardware/software ownership from beginning to end could help Google Android compete more effectively,” she said. “And any future Android handsets designed and made directly by Google may also set the standard for other handset makers, which could further reduce fragmentation assuming these future Google Android become de facto Android standards.”

At a minimum, said IDC’s Llamas, Google will be able to work with its Motorola subsidiary to test minimum hardware requirements for future versions of the Android OS and set minimum standards for licensees in the same way that Microsoft does for its Windows 7 OS.

Another benefit for Google is direct access to Motorola’s R&D capabilities in set-top boxes, said Tina Teng, senior analyst for wireless communications at IHS. “Motorola has engineering expertise in a wide range of products where Android will be used, including set-top boxes and televisions. The addition of Motorola’s engineering and intellectual property will accelerate Android’s time-to-market in these areas and potentially revitalize the Google TV business, which so far has met with little success.”

Despite the potential upsides for all parties, Google could risk Android’s momentum if the company is seen as playing favorites with its Motorola subsidiary, analysts said.

“The risk of alienation from the other Android licensees possibly outweighs the benefits of the acquisition,” said Strategy Analytics director Peter King,

Said David Wertheimer, CEO of USC’s Entertainment Technology Center, ”One thing that HTC, Samsung, LG and others loved about Android was that Google was a software company — an enabler, not a competitor. This acquisition has the potential to change all of that and put Google in direct competition with its partners who manufacture handsets. That may be good for Google because they can more tightly control the hardware-software linkage in their flagship products, like Apple does. However, that competition may drive some companies like HTC, who have been totally committed to Android, towards Microsoft, causing this acquisition to backfire on Google.”

Added IHS’s Teng, “Although Google has said Motorola will continue to operate as a separate company, this development has to raise questions among the other Android licensees as to the level of support they will get from Google in the future.”


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