Yesterday was a historic day for Google as they announced the acquisition of Motorola Mobility for $12.5 Billion. The total cost of the purchase is the biggest ever made by Google and close to a third of the total cash that they have in their war chest with which to make acquisitions.
The acquisition was unexpected but according to various media reports negotiations have been going on for close to 5 weeks. Google have added 19000 people to their payroll, if the acquisition is not blocked by regulators in the US. The move was done in my opinion for one reason: patents. Google was unsuccessful in getting a slice of the Nortel patents which was auctioned off a few weeks ago. So they then decided to look for an acquisition to bolster their patent holdings. The lack of patents was a big weakness for Android and potentially made Android a target for legal issues.
I believe that Google is taking a leaf from Apple’s playbook and want to own the entire production cycle for hardware. The difference is that Apple has done this for years and knows all the pitfalls that come with it. Google on the other has struggled with the retail element as witnessed with the Nexus One.
Now they suddenly have the ability to manufacture their own cell phones, tablets and routers – provided Motorola Mobility will be seen an independent company. as. why spend all that money and not leverage it properly? It makes no sense. All the talk of independence is done so for regulatory approval which still needs to be received, and the Motorola acquisition has led to a lot of uncertainty for the OEM Android partners (Sony Ericsson, Samsung, LG and HTC).
I believe strongly that certain future versions of Android will be locked from their OEM partners. This acquisition has made Google a cross channel competitor for their OEM partners. In the long run this may even lead to some current Android OEM partners breaking away from Android and gaining a better relationship with Microsoft by potentially using Windows Phone 7 as their default operating system.
I think the intentions have been made clear; Google is trying to augment their offering to the public. Only time will tell whether this acquisition will be successful and how it affects the relationships that Google has with their partners. So Larry (Page: Founder of Google), what is next on your wish list?