Google’s announcement that it would pay $12.5
billion to buy Motorola Mobility was the most discussed deal in the
If the deal succeeds, Google will have a hardware
platform it controls and could offer the sort of integrated hardware-OS package
that Apple is currently offering.
The deal can be seen as an extension of Google’s attempt
to enter the Smartphone market, yet it had already tried it with its Nexus one
Smartphone. Google wasn’t able to successfully get consumers to buy the Nexus
One, primarily due to the strong position carriers have in setting lower
price-points for mobile devices.
Motorola was one of the earliest supporters of Android
and helped kick start the momentum for the OS with the Droid handset. Also, the
company was first to use Honeycomb, the first Android OS flavor built
specifically for tablets on its Motorola Xoom. With this deal, Google is
looking to acquire Motorola’s 17,000 patents.
After the possible acquisition, Google would have its own
integrated Android ecosystem and it might help the company to acquire more
market share of mobile as a whole. The company is also interested for
partnership with HTC, Samsung and LG because of positive revolution in global
Google said it will run Motorola as a separate business,
but the acquisition raises a lot of questions about how partners will
However, the deal can also be looked in the background of
tax benefits because Motorola Mobility has seen major losses in the industry
and by acquiring Motorola, Google can offset those losses against its future
In its Q3 2011 results, Motorola shows that it only
shipped 100,000 Xoom tablets during the quarter and its competitor Apple
shipped 11.1 million iPads during the same period.
According to Tax experts of New York accounting, through
the acquisition Google can expect to reap $700 million a year in tax deductions
from future profits each year through 2019. Google also will be able to
immediately reduce its taxes by $1 billion due to Motorola Mobility’s US net
operating loss, and by a further $700 million due to its foreign operating
Google generated $9.72 billion revenue, an increase of 33
percent compared to third quarter of 2010. Google reported $9.02 billion in
revenue last quarter, with $2.51 billion in net income.
Currently, all major mobile manufacturers are riding high
on Google’s open platform Android. Since it’s a free platform, all these
manufacturers are also fighting patent lawsuits against the Android platform.
With this $12.5 billion deal, all the Smartphone vendors
using the Android platform such as Sony Ericsson, Samsung and HTC anticipates
protection from legal attacks.
Motorola’s patent portfolio will strengthen Android’s
position against patent lawsuits. A number of companies, including Apple and
Microsoft, have sued Android licensees for patent infringement.
The announcement of Google’s acquisition of Motorola came
just weeks after it failed to win Nortel Networks’ vast patent portfolio in an
auction of the Canadian telecommunication company’s assets.
A coalition of six companies–Apple, EMC Corp., Ericsson Microsoft,
Research In Motion and Sony–paid $4.5 billion for Nortel’s patents (Apple
contributed $2.6 billion).
After failing its bid in the Nortel auction, Google
increased its bid for Motorola by 33 percent before settling on the $12.5
billion figure. That demonstrates the eagerness of Google to acquire the
arsenal of Motorola’s current 17,000 and 7,500 pending patents.
The premium that companies paid for patents during 2011
reflects the growing importance of the courtroom as a Smartphone battleground.
However, with court cases still playing out, it’s unclear that Google’s
Motorola purchase will give Android the legal protection.
Despite all views that Google would be benefitted
greatly, some analysts beg to differ and say that this deal could have a
positive impact on Microsoft because after the acquisition Google could be a
threat to its licensee manufactures and they could diversifying to other OSes.
HTC and Samsung are already using Windows and if they see
any threat from this merger, Windows Mobile could be an alternative.
Voicing with the predictions, Nokia CEO Stephen Elop also
said that the purchase should worry Android handset makers, since Google might
favor Motorola with Android phones.
While on the other hand, Chairman Eric Schmidt scrapped
such predictions and said that Google bought Motorola for more than its
patents, he vowed Google would not “screw up” the Android
ecosystem as a result of the deal.
after the Google-Motorola deal, the fight will continue between Apple on the
one hand and Android on the other. Also, Windows will get slightly better
chance depending on how the Google-Motorola deal pans out for the likes of HTC
Note: TelecomLead deal of 2011 was done by
TelecomLead.com editorial team
By Danish Khan