Google to Acquire Motorola Mobility – Analysis

Google to Acquire Motorola Mobility – Analysis

Google will acquire Motorola for approximately $40 per share in cash, or around $12.5 billion dollars, “a premium of 63% to the closing price of Motorola Mobility shares on Friday, August 12, 2011,” according to Google’s press release. This will make it the biggest ever tech acquisition (if approved) for any of the big players including both Apple and Microsoft.

“The combination of Google and Motorola will not only supercharge Android, but will also enhance competition and offer consumers accelerating innovation, greater choice, and wonderful user experiences” Google CEO Larry Page wrote in a post on the company’s official blog.

Well this came as a shock to everybody! I’ve delayed writing anything about this story so I could gauge the industries reaction to the purchase as there’s more than enough information out there regarding the actual mechanics of the purchase. There’s is hardly any agreement out there between the analysts as to what exactly the long term goal of this is, but either way it’s a stroke of genius or it’s going to cause them some serious problems.

What’s included in the deal

  • 17,000 patents with an additional 7,500 pending approval
  • 20,000 employees around the world
  • Circa $3bn annual profits from an $11bn turnover
  • SmartPhone Hardware
  • Tablet Hardware
  • Set-top Box Hardware

Which all makes interesting reading, there’s one thing for sure and that’s the primary reason for this purchase is patents, especially as Google lost out on 6,000 Nortel patents bought by Apple, Microsoft & RIM back in July. These patents were clearly bought to defend Android and its partners from the increasingly popular sport of patent trolling.

The employee numbers are more of a concern though, Google itself has 25,800 employees so this is almost a doubling of the workforce overnight! This is a massive cultural challenge, we all know that Google is quite unique about the way it’s employees are allowed to work, can they bring that openness and innovative approach to Motorola’s staff whilst still increasing shareholder value?

It’s the SmartPhone and Tablet hardware that is causing the most discussion though, Apple have very tight control over their hardware which allows them to provide their users with a tightly integrated (controlled?) environment. Microsoft have minimum design criteria’s that all their hardware partners must adhere to, again this is to ensure certain aspects of all WinMo phones are the same. Google took a totally different approach by allowing its partners to do whatever they wanted, you could argue this breed’s innovation but it can also make the Android experience across hardware platforms slightly different.

Either way, if I was one of Google’s hardware partners (Samsung, HTC, etal) I’d be very nervous right now, they did all release a short statement in support of the acquisition but there was something not right, they seemed coerced and through gritted teeth. Surely if you were Google you’d release updates earlier on your own hardware therefore keeping it one step ahead? Google have said they intend to leave Mobility running as a separate business so we’ll have to wait and see on this one, maybe they’ll spin off the SmartPhone and Tablet divisions to pacify their partners. Let’s face it, Motorola’s phones haven’t exactly set the world on fire, in fact I reckon I can count on one hand all the decent phones Motorola have put out since the fantastic StarTac back in 1996. Motorola’s tablet division is a different story though, the Xoom Tablet being a very good device.

There is one hardware division that is very interesting though and that’s the Set-top box division. Google has been trying to get into the TV market with Google TV for quite a while now. It took the same approach as with Android and let partners create the hardware, this hasn’t really worked though (look at the recent Logitech debacle) as the price and quality just hasn’t been there.  This purchase gives Google direct access to the hardware and an already installed base of set-top boxes that I can see getting a Google TV makeover sometime soon.

Motorola Financials

Millions of U.S. Dollars As of: Dec 31
Restated USD
Dec 31
Restated USD
Dec 31
Restated USD
Dec 31
TOTAL REVENUES 23,373.0 17,099.0 11,050.0 11,460.0
Cost of Goods Sold 18,546.0 13,832.0 8,842.0 8,478.0
GROSS PROFIT 4,827.0 3,267.0 2,208.0 2,982.0

Motorola’s revenues have plummeted over the past four years, they’ve simply struggled to find a way to compete with the iPhone and the other SmartPhone manufacturers.

Do Google intend to just sell off the SmartPhone division? In my mind this would be the logical decision, it would allow Google to remain independent, pacify its current partners and remove some of the cultural integration headaches. It would raise questions over Motorola’s ability to compete without the Patents though, maybe a deal will get struck there. Maybe Google intend to go down the Apple hardware/software controlled route, somehow I doubt that, it goes against everything people like about Google.

From a patent point of view, the recent Nortel Patents went for $750k per patent and Google bought Motorola’s for $510k each, you could argue that Google got the better deal here. You could also argue that either way that’s a ridiculous amount of money to pay for patents and I’d tend to agree. There is also a rumour that Motorola were going to use these patents to go on the attack against some of Google’s partners, was this another driver behind the acquisition?


This is clearly a case of Google getting fed up with Apple using some ridiculous patent arguments to prevent and delay Google’s partners from selling their wares. I kid you not, these are some of these arguments used by Apple in the current Samsung Tab case in Europe: –

  • a rectangular product with four evenly rounded corners
  • a flat, clear surface that covers the front of the product
  • a visible metal frame around the flat, clear surface
  • a display that is centred on the clear surface
  • under the clear surface, a neutral margin around the sides of the display
  • if the product is switched on, coloured icons within the display

It’s frustrating to see this going on when the money could be more wisely spent on product improvements but there you go.

I see Google disposing of the SmartPhone and Tablet Arms with some deal on patents, I see new set-top boxes with Google TV built into them and I hope I see somebody banging all these patent trolls heads together and then the streamlining of the global patent system to prevent large businesses with deep pockets trampling all over innovation with ridiculous patent cases.


Google Buys Motorola Mobility for $12.5 Billion – Mashable, 16th Aug 2011

Supercharging Android: Google to Acquire Motorola Mobility – Google Official Blog, 15th Aug 2011

The Smartphone Cold War: Is the Motorola Mobility Acquisition Google’s Greatest Move, Or Their Worst? – TheAndroid, 15th Aug 2011

Motorola Mobility Financials – Bloomberg

Sorry, comments are closed for this post.