Google drops a bombshell, buys Motorola

I was shocked to read today that Google went out and plunked down $12.5 billion for Motorola. I’m sure that other Android phone makers aren’t exactly happy about it–it means Google is going to be competing with them, unless Google just bought Motorola for patents–but I don’t really see how Google had much choice.

Google risks alienating its partners, but…. More on that in a minute.

Motorola, you see, has 17,000 patents, with another 7,500 pending, and engineering teams that will undoubtedly continue to produce even more. Apple, Microsoft, and Oracle have all gone after Google or its partners lately about patents. Now Google can counter. Oh, you claim we’re violating 14 patents. Well, we see your product violates 14 of ours, so let’s talk licensing…

And that’s important. Google was looking at having to pay $15 in license fees for every Android device sold, which is more than Microsoft charges for Windows Mobile.

It’s a stupid game, because many of the patents are mundane. Unfortunately, if you want to deal in technology these days, you have to play it.

Google is saying they will continue to develop and market the former Motorola product line, but they may or may not have to. The purchase price pretty much forces the issue. A consortium of Apple, Microsoft, and Research in Motion bought Nortel’s portfolio of 6,000 patents for $4.5 billion. Motorola had four times as many patents–assuming most of the pending patents are granted, which seems pretty safe–and Google didn’t pay three times as much. All of the analysis I’ve read suggests that the consortium of everyone but Google overpaid for the Nortel patents, and in light of this purchase, maybe they really did. Google pretty much had to make a bold move to counter it, and they did.

Google’s partners may not like having to compete with Google now, but there are two takes on that.

The conventional take is that Google’s partners don’t have any better options anyway. They can go get Windows Phone 7.x, but Nokia is already the preferred vendor there. So they’d be a second-tier partner. They can go with HP and the Web OS they got when they bought Palm, but again, they’ll be competing with the developer, and gambling on a system that has almost no market share at present. Partnering with Apple isn’t an option.

Or they can hedge their bets, releasing phones with any OS they can license.

But I’ve seen another interesting take. Maybe Google still doesn’t really want to be in the hardware business. They’ve said that before. They’re entitled to change their mind, but maybe they haven’t. So they can take the Motorola patents, stabilize the company, and then, once the company is profitable again, license the patents to it and spin it off. Then they have their patents and they’ve returned some value to shareholders, and they’ve only irritated their partners for a short time–however long it takes to stabilize the company.

And with Google actually developing and marketing handsets, they may gain perspective that will make Android better. It can’t hurt.

I saw another interesting idea on Slashdot. The Department of Defense is looking at different uses for smartphones, but virtually all smartphones are made in China today. Perhaps Google could negotiate a deal to bring smartphone production back to the United States. The DoD would be wise to take the deal. It would eliminate the possibility of any backdoors in the hardware and it would create a lot of manufacturing jobs, and, in turn, goodwill. Google could perhaps team up with either Texas Instruments or Freescale, the former Motorola microprocessor division, to design and manufacture the chips. And that idea isn’t completely incompatible with the spinoff.

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