Google likely to divest Motorola mobile device and Home hardware businesses
Telecom Lead America: After initiating a massive restructuring initiative to revamp Motorola, it is still likely that Google will want to get out of the hardware business to focus on its core business and cultivating the Android ecosystem. Motorola has been dilutive to margins and will continue to drag on Google’s highly profitable core search advertising business even if Motorola gets on more solid footing.
TBR believes being in the hardware business is not part of Google’s long-term strategy and that once the unit is restructured and healthier, Google will be more aggressive in looking to sell those assets. There is a list of Android OEMs that would be interested in purchasing Motorola’s mobile device and Home businesses including Huawei, Samsung, Sony, LG, and HTC. These OEMs would be very interested in purchasing Motorola from Google because it will provide them with operational synergies and access to new sales channels.
If and when Google decides to exit hardware, it will undoubtedly keep the 17,000 patents that came with Motorola because that was the key asset Google wanted when deciding to purchase the company.
Android ecosystem development is overarching theme to Google’s investments
Getting Android on as many screens as possible and making those screens work together seamlessly is a key objective at Google. By creating this ecosystem, supported by a list of OEMs mass producing the hardware, Google hopes to establish a dominant position in the overall user experience as it relates to multimedia devices, namely the PC, TV, smartphone, and tablet.
Though it is true that mobile ads carry a lower price compared to PC ads, Google is confident that new tools and business models that will emerge from this Android ecosystem it is creating will allow the company to drive greater economies of scale, which will lead to margin gains over the long-term.
Though Google is trying its hand at hardware via Motorola, the company’s long-term goal is to be exclusively in the more lucrative software business.
Chris Antlitz, analyst, TBR’s Networking and Mobility Practice