Motorola Mobility to serve as lab for Google — analysts

With its announcement on Monday that it will buy Motorola Mobility — the mobile device unit of tech icon Motorola — for $12.5 billion, Google is expected to have a hardware division where it could sharpen its software prowess. This is according to analyst firms IDC and Ovum which noted that the agreement comes at a time when Google’s Android operating system is the leader in the smartphone OS market, but is struggling to gain traction in the media tablet market. In terms of unit shipments, Motorola’s smartphones trail overall market leaders (Apple, Samsung, and Nokia) as well as other Android smartphone vendors (Samsung, HTC, and LG Electronics as of 2Q11). Motorola’s flagship Android media tablet — the Xoom was the first to market earlier this year with the Android tablet-specific Honeycomb version of the OS, but slow adoption of the device has forced the company to slash its price. According to Google, Motorola Mobility will function as an independent company and as an independent licensee of Android. Google executives also noted that Android will remain available to all of its current OEM partners. Google expects to complete the transaction by the end of 2011/early 2012, pending regulatory approval. Benefits for Google and Motorola Mobility “Clearly, Google benefits from Motorola Mobility’s deep patent portfolio," IDC said. After not acquiring any of Nortel’s patents earlier this year, Google will gain access to Motorola’s roughly 17,000 current patents and another 7,500 patents pending, IDC noted. Google has been the target of numerous patent lawsuits from Apple and Microsoft — two companies at the forefront of Nortel’s patent auction. IDC said Motorola Mobility has a long-standing patent history within mobility, which will not only provide protection to Google, but also the ability to challenge other vendors for patent infringement. “This potentially sets up the scenario for all parties involved to either delay pending lawsuits or settle out of court without interrupting business," the analyst firm said. Google’s $12.5 billion spend for Motorola Mobility vastly exceeded the total spend for Nortel’s patents ($4.5 billion for 6000 patents) by a consortium including Apple, EMC, Microsoft, RIM, and Sony. But given Motorola Mobility’s deep library and history (Motorola was founded in 1928), this acquisition provides a strong arsenal for Google, IDC noted. “At the same time, Google’s other options among Android handset makers would have been either cost prohibitive and complex (LG and Samsung) or not as deep from a patent perspective (HTC)," it observed. For research firm Ovum, Google’s purchase of Motorola Mobility brings the Internet giant significantly closer to Ovum’s hypothesis of a “managed device platform" where a vendor controls all aspects of a platform, including hardware, software, content and online services. “Google’s rhetoric about ‘supercharging’ the Android ecosystem implies that Google plans to work extra closely with the Motorola team. This is a delicate balancing act for Google; any hint of favoritism or signs that Motorola is getting an unfair advantage, and other key Android vendors will not be pleased," Ovum said. It added: “We may see Samsung, HTC, LG, Sony Ericsson and others reinvest in alternative mobile platforms, most likely Microsoft’s Windows Phone ecosystem, to keep Google honest." Ovum said the acquisition will significantly strengthen Google’s patent portfolio, an important move in light of ongoing patent litigation across the mobile industry, particularly litigation aimed at Android and its vendor partners. “Motorola has a strong patent portfolio and a long history of producing advanced devices and technologies, but has been struggling financially for a number of years, making it an attractive target," it noted. Cash bonanza IDC said the influx of cash for Motorola Mobility will provide monetary resources to the company to move further along its mobile device strategy. Since its separation from Motorola Solutions in January, the company’s balance sheet has remained strong but has been running at an operating loss each quarter. “How Motorola Mobility will use this money remains to be seen, whether it be for research and development, marketing, or channel distribution enhancement," IDC said. The impact of this acquisition, it added, will not be felt in the near term as Google’s strength is in its Android OS and software, and it does not bring new distribution channels to Motorola Mobility. “From a long term perspective, the company stands to be more strongly outfitted and supported to compete against other device vendors," IDC said. Tighter integration of software and hardware The combination of Google’s Android software coupled with Motorola Mobility’s hardware provides Google the opportunity to gain similar integration synergies seen between Apple’s iOS, iPhone, and iPad; and RIM’s BlackBerry OS/QNX and its phones and tablets, IDC noted. However, doing so could come at the cost of alienating other Android device vendors, namely HTC, LG Electronics, and Samsung, which have made Android the cornerstone of their respective strategies – thus providing a potential downside to the Google acquisition, IDC said. “If key Android OEMs get nervous and are not getting the proper partner attention from Google there is a potential for defection as these OEMs seek other partners or acquisitions for the mobile OS," it noted Despite assurances from Google that partners feel good about this acquisition, IDC said there is a potential doomsday scenario for Google if key OEMs consider other platforms, including MeeGo, webOS, or Windows Phone. “Windows Phone in particular provides an interesting play here," it said. With the pending Nokia launch of Windows Phone devices as its core OS, a successful launch tied with OEMs reconsidering other OSes could provide further development of Windows Phone with the Android Big 3 OEMs – all of which have already deployed Windows Phone 7 devices. Due to these valuable partners, however, IDC said it doubts that Google will abandon these relationships but believes that Google and its partners will have tighter integration between hardware and software, using Motorola Mobility as a reference platform for others to follow. “This is similar to what Microsoft is doing with its Windows Phone 7 handset partners, and gives Google and its handset partners the opportunity to bring further innovation and differentiation to Android smartphones," the analyst firm said. “There is also a possibility that Google could push the integration with Motorola in one area, for example tablets, in order to enhance the user experience. This would limit the risk of OEM defection as the unit exposure is far lower," it added. Getting Android into the enterprise Google’s planned acquisition of Motorola Mobility also has some interesting ramifications from an enterprise point of view, IDC said. “While shipments of Android devices around the world have increased at astounding volumes each quarter, its presence in the enterprise has yet to follow suit," it observed. The reason for this discrepancy, IDC said, is that many companies are not comfortable with the level of manageability and security that Android offers as a standalone platform. To remedy this, Android licensees such as Motorola Mobility and others have taken it upon themselves to develop relationships with key partners in the mobile device management and security space to offer more enterprise-friendly Android devices. IDC said Android-based tablets have failed to catch fire in the market for two major reasons: The operating system still lacks polish, and the first wave of devices launched at much too high a price point. “Google’s ownership of Motorola Mobility gives the company the ability to address both issues. Future versions of Android will undoubtedly address many of the rough spots still inherent in the OS, and that was going to happen regardless of this acquisition," it noted. However, by owning the hardware itself, IDC said Google can focus on more tightly integrating the software and the device. “Done well, this helps Motorola to better compete with Apple’s highly polished iPad products in an area where the risk of alienating other OEMs is far lower. Second, and equally important, is that Google’s deep pockets give Motorola the ability to ship devices at much more affordable price points," it said. Final word IDC said it expects that Google will not abandon its position as leading OS or its corresponding strong partnerships with key OEM partners, but the acquisition provides new fuel to OEMs considering alternative platforms. “With the ownership of hardware, Google has a real opportunity to go to the next phase where it can differentiate on the hardware and software experience to build reference platforms. Such a scenario provides for much better overall integration of software and hardware," the analyst firm said. IDC added: “Although many questions remain on the role of Motorola within Google including management culture and brand, it is clear for now Google is letting Motorola remain as a standalone entity. “However, beyond an improved hardware and software integration for both companies, much needed patent protection for Google and more financial stability for Motorola, this announcement does not shake-up the market, but rather provides the opportunity to enhance the Android experience across the ecosystem." — Newsbytes.ph