MORE than a week after Google decided to pay $US12.5 billion ($12 billion) for mobile phone pioneer Motorola Mobility, with international analysts squabbling over the precise intention and likely impact of what is an undeniably historic investment, Bleeding Edge admits to more-than-usual bewilderment over the future of mobile telephony.
According to a post by Google co-founder Larry Page on the Official Google Blog, the alliance will create ”amazing user experiences that supercharge the entire Android ecosystem for the benefit of consumers, partners and developers everywhere”.
No doubt we should be rejoicing at the good fortune of consumers, partners and developers everywhere. Unfortunately, in a less altruistic universe, the fact we have recently invested a substantial sum on the hardware, apps and peripherals that constitute the Apple iPhone ecosystem somewhat constrains our enthusiasm.
We suspect even dedicated Android users will be troubled by certain ambiguities in this deal.
Motorola Mobility will be run as a separate entity and Page asserts Google’s operating system will remain open but it seems highly possible the direct relationship between Google and Motorola could mean manufacturers such as HTC and Samsung will at some point stop supercharging the Android ecosystem, possibly embracing amazing user experiences from Microsoft, and locking consumers into Motorola devices.
The alliance raises some other pertinent questions: will we see a slowing of mobile innovation and will we all have to pay more for handsets, now that Google has joined the unhealthy patents war that has been roiling the industry for the past two years?
IP litigation analyst LexMachina says core mobile handset litigation increased 25 per cent from 2006 through to the end of 2010, illustrated by a graphic done for the Guardian newspaper at bit.ly/bhvr9G.
But whatever sympathy Page might have gained with his recent complaints that ”companies including Microsoft and Apple are banding together in anti-competitive patent attacks on Android” is likely to have dissipated with a purchase that, while possibly forced on Google, nonetheless expands the battle front significantly.
His statement notes that the US Department of Justice had intervened in the results of one recent patent auction to ”protect competition and innovation in the open source software community” and was examining the results of the Nortel auction (in which Apple, Microsoft, RIM, Ericsson, Sony and EMC paid $4.5 billion for a portfolio of 6000 patents and applications owned by the bankrupt telecommunications giant). But the fact Google has paid an even larger sum for Motorola’s 17,000 patents, with another 7500 pending, is likely to render such an investigation moot.
Worse for Google investors and customers is the possibility that despite the fact Motorola built the world’s first portable, as distinct from car-mounted mobile phone, in the DynaTAC 8000X ”brick”, its patents might have been substantially overvalued.
While Nomura analyst Stuart Jeffrey values the patents at $6 billion, ”intellectual property analyst-turned-activist” Florian Mueller suggests that Motorola Mobility’s patent hand is particularly weak.
The company is already locked in court actions with Microsoft and Apple, which Mueller predicts will not end well for Motorola. His opinion is supported by the downgrading of Google’s rating by Standard & Poor’s from ”buy” to ”sell” as a result of the takeover.
”As odd as it may seem,” Mueller says, ”it’s increasingly likely that – come March 2012 – Google could be trying to consummate the acquisition of a company that’s legally barred from importing Android devices into the United States. How’s that for a dowry?”
Corporate finance advisers Bristol York estimate that device makers already have to pay an average of 15 per cent to 20 per cent of the purchase price of each mobile handset in licence fees on 200 to 300 patents, and the recent victory by Nokia over Apple – which involved a bulk payment and ongoing royalties, likely to extend to other competitors – will exacerbate that.
Android has had a significant impact on Motorola’s reputation, with its Droid handset forcing the industry to review its position as a fallen giant that had lost its way since the glory days of its RAZR clamshell, which ultimately sacrificed functionality to fashion and was left in the wake of newcomers such as the Palm Treo and RIM’s BlackBerry.
Possibly one of the most valuable commodities Google could pick up from its purchase is the lesson, articulated by Motorola’s co-chief executive Greg Brown, of how a once-great company could go off the rails.
In an interview with Business Week in 2009, Brown admitted the company had suffered from ”an unhealthy hubris that manifested itself in us thinking we knew what was best for customers, as opposed to listening in an unfiltered and unemotional way to what customers were telling us”.
”I think success is one of the biggest impediments to growth,” Brown told the magazine. ”It can be blinding … sustainable success has to be earned every day. And sometimes a hit product can mask the brutal reality that more work needs to be done.”