Tuesday, 16 August 2011

Google changes direction. All that cash just has to find a place to go.

Moving from what they are good at to hardware and new markets.

Google buys Motorola Mobility for $12.5 billion cash. That's a lot of money to pay to make a point and go head to head with Apple.

by Tom Thorne
The important fact that emerges from this purchase yesterday is Google is now into the hardware business. They have left the world of search, software, and mail and advertising services to attach and embrace a hardware company. In addition, they have now pushed along Android as their operating system for mobile devices such as smart phones and tablets. They think they have laid down a gauntlet to Apple.
After spending a big buck...$12.5 billion...they are attempting to capture elements for the mobility market. This probably means that to get any kind of vertical approach to the smart phone and tablet markets Microsoft will now have to look at acquiring a hardware firm too. That in my eyes looks like Research in Motion (RIM). You heard it here first. They are already in bed with Microsoft's phone software.
The bad news is Google is not integrating any management functions with Motorola on an operating day to day level. Apparently both firms will stay as they are and be run independently.  This is a mistake when compared to the fully integrated Apple Inc. They have their hardware software act together in a symbiotic way that all these buyouts cannot duplicate. 
RIM and Microsoft?
All the competitors of Apple Inc. are scrambling to get the software hardware act together. Strangely, RIM has this in place but for some reason they have faltered and stumbled for the moment. That is why they are easy pickings for Microsoft who's has a corporate history of acquiring talent that is akin to a vulture. They feed off the skills and innovation of others. They have a corporate culture of following not leading that goes back a long way.
These deals that will make being too trashy with each other quite difficult. This is mainly due to the interdependent nature of the patents they all co-own after picking at the dying body of Nortel. This means that there will be a certain amount of civility in the mobile market concerning standards and protocols of how smart phones actually work. That cannot be messed with.
Apple is about to launch iPhone 5 which will keep their ascendency in this market at the front of the pack and may help to restore their OS to first place against Android.  Apple's innovation abilities will enable them to set the pace for this market. They will be strengthened in this as the others scramble to buy out each other and somehow merge corporate styles and cultures while simultaneously providing useful product to this already fragmented marketplace.
That will be a shakeout process of this Google decision. However, Apple will remain the leader in the business but also the most daring and innovative leader. Watch now for a hostile takeover of RIM by Microsoft. I predict that if this happens the stock of both companies will drop in anticipation of a hard deal. This takeover if it happens will not be friendly.
RIM will try and stay independent from Microsoft and that will sap a lot of energy from their management at a time when that energy needs to be going into product development and marketing. The other player in this market is Nokia and they have the technical skills to remain in the game but perhaps not the savvy to play games with the likes of Google, Microsoft and Apple. 
The other observation I have is we are seeing the cash reserves of these companies being used to create economic vitality in the marketplace. This kind of private sector activity is a whole lot better than governments bailing out bankers after rounds of  dubious decisions that created very little but the economic stress we are all trying to escape.
© Copyright 2011, Tom Thorne, All Rights Reserved.


  1. I view this as more of a defensive move on Google's part rather than a bold step forward. After the Nortel bit failed Google probably did not like the prospects of paying both Apple and Microsoft for virtually every handset Androids ended up on due to the patents the consortium had at its disposal after they grabbed at Nortel.

    Now Google has a bit of wiggle room but it's a Pyrrhic victory at best. The strength of the Android OS was the fact that it was meant to be hardware independent, a platform that was designed to work on any phone that could support the specs. As a member of basically the Open Platform Consortium (i could be remembering the name of this group wrong) Google is now potentially alienating many providers, especially Samsung who has been the darling of Android for the last little while.

    Does Google optimize Motorola hardware for Android and wield their new assets and raise the eire of Samsung or will Motorola remain merely a cluster of patents that Google uses as a legal lever to counter sue in this Tech Cold War we are in? I think we are all going to see inaction until Apple completes its programmable SIM card because the Applesoft Alliance has hamstrung Google pretty hard.

  2. I hate that I don't have an edit button for the little typos I've made, heh.