Jonathan Yarmis is Doctor Disruptive

Google’s decision to buy Motorola Mobility for $12.5 billion is one of the more nuanced acquisitions we’ve seen in a long time.  There are certainly a few negatives to the deal but the positives are so overwhelming as to render those negatives largely irrelevant.

The bottom line is that Google had to do something.  After having lost the Nortel patent treasure trove and facing an increasingly litigious Apple, Google’s options were limited.  The fact that Apple was able to gain an injunction against Samsung’s Android-based Galaxy Tab in Europe forced Google’s hand.  Google had been sitting on the sidelines while the Android licensees were bearing the brunt of the legal expenses, and risk.  Google has responded with a resounding play.  This acquisition very much levels the patent playing field over which so much is at stake.  (I won’t get into what I think about this whole patent situation but it’s clearly gone horribly awry, from protecting innovation to stifling it.)

Sure the licensees can’t be happy about having to compete with their technology provider.  That’s never a good situation.  However, I think Google should largely be able to assuage their concerns and in fact, I don’t think HTC and Samsung are the biggest target of this acquisition.  Google continues to need them to provide a rich ecosystem of devices behind Android.  And besides, Samsung and HTC are kind of stuck.  What are they going to do?  Throw their weight behind Windows Mobile?  That situation is no better and Google’s acquisition here may even force Microsoft into buying Nokia or RIM.  WebOS?  Nope.  This is still their best bet and they’re likely to be able to compete effectively with Google/Motorola to deliver compelling handsets, assuming some semblance of a level playing field, which I expect to be the case.

Google’s acquisition here really targets two other segments of the mobile space:  Apple and the carriers.  The patent battle with Apple is now on much more even footing although the real winners here are likely to be the lawyers who now get to sort this all out.  As regards the carriers, Google had to be envious of Apple’s ability to pretty much call its shots with regard to full hardware and software design.  Google had to do much more to kowtow to the carriers’ backwards notions of how things should be brought to market.  Now Google can deliver against its own vision even while Samsung, HTC and the others can get cozier with the carriers, dealing with the double-edged sword of carrier favoritism.  That favoritism clearly benefited Motorola with the original Droid launch.  Now we’ll get to see how much that might benefit HTC and Samsung as against Google’s unified vision but potentially weaker carrier relationship.  Google has clearly been trying to develop direct customer relationships beyond the control of carriers; now they have that chance.

Underappreciated in this deal is Motorola’s cable set top box business.  Motorola and Cisco/Scientific Atlanta are the dominant leaders in this space.  (I actually worked for General Instrument back in the middle 80’s, before Motorola acquired it.)  Google clearly continues to struggle with Google TV and its partners have recently slashed the prices of their devices, down as low as $99 (from $299).  All of a sudden, Google TV now has a major market share.  Of course it will take years for this to fully manifest itself as cable box life cycles are pretty long.  (When’s the last time you changed cable boxes?  Probably when you moved, if then.)  But the discussions Google will have with cable companies and TV manufacturers will change considerably after this acquisition.  All of a sudden, Google means more to them.  This might actually drive some business to Cisco but it also present Google with a unique opportunity to reshape its TV and media strategy.  I’ll have to give this one more thought.

Bottom line, this was a great and necessary move by Google.  The Android partners are not as happy as their press release comments indicate but they needed patent protection from Google and this is the best possible way Google had to accomplish that.  They can still compete effectively and anyhow, they don’t really have a choice.

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