I remember as a kid reading a Max Brand short story, "Wine on the Desert," in which a rancher exacts revenge on a bad guy by filling his canteen with wine instead of water. The bad guy is way out in the desert before he opens his canteen. He realizes immediately it’s wine, but he’s so thirsty he drinks it anyway, goes blind, and dies before he can find any water.
My first thought on hearing that Google was purchasing Motorola’s mobility business for US $12.5 billion was that the company’s thirst for patents seems equally desperate—and may prove equally self-destructive.
Last month, the bidding for bankrupt Nortel Network’s patent portfolio reached $4.5 billion, too rich apparently for Google’s blood, so the company dropped out of the auction, which it had initiated. In hindsight, maybe it should have kept bidding; buying Motorola is not only costing almost three times as much, but it also saddles Google with a hardware business for the first time. Worse, it’s a hardware business that competes with several of Google's biggest customers.
In other respects, however, Google and Motorola are a match made in heaven—so much so that one analyst, Ben Bajarin, a consumer technology analyst for Creative Strategies, advocated it last week, without any inside knowledge, days before the announcement, in a posting to TechPinions.
Bajarin offered three reasons Google should buy Motorola.
First, Motorola has already staked its future on Android—it’s the only mobile platform the company supports.
Second, Motorola was saddled with a hardware-only strategy for making money, whereas Google has already worked out a “hardware as a service model” for the Chromebook—$28 per month, instead of a single up-front purchase.
And Google needs hardware to come down in price because, as Bajarin wrote last week, “Google needs as many Android devices on the market as possible.... Imagine if you could get one of the latest Android smart phones fully featured for less than $99. The price barrier to high-end smart phones would be gone.”
The third reason in Bajarin’s article was the first one he mentioned when I spoke with him on the phone today: It’s Motorola’s patent portfolio. Yes, it’s costing nearly three times as much as Nortel’s went for, but it’s also nearly three times as large—and is of better quality, at least when it comes to defending Android against lawsuits by Apple and Microsoft. In his TechPinion article, Bajarin quoted Morgan Stanley analyst Ehud Gelblum, who noted that “Motorola asserted 18 patents against Apple, and sued Apple first, whereas Apple has asserted just six patents against Motorola."
What about the downside?
Bajarin agrees that owning Motorola will put a strain on Google’s relationships with other Android device manufacturers, but he thinks it won’t break those ties. He did agree that it may weaken them. “At the end of the day,” he told me, “you’re going to be pretty secretive” when it comes to sharing any hardware tricks with a company that’s selling competing hardware.
He also said that while he didn’t expect any manufacturers to stop making Android devices, some might make fewer of them, perhaps finding new virtues to Window Phone 7 and WebOS. “HTC in particular,” Bajarin said, “wanted to buy WebOS” before HP ended up with it.
If Google bought Motorola Mobility solely for its patents, it’s a sad commentary on what the patent world has become. (That’s not a new story, by the way—Planet’s Money’s excellent reporting on the patent system a couple of weeks ago, “When Patents Attack,” was foreshadowed back in 2004 by an IEEE Spectrum story, “Patent Profiteers.”)
That Motorola Mobility would get sold off and Motorola would shrink to a dot, like the picture on an old-fashioned tube television, was inevitable—so much so that we devoted a podcast to it almost exactly a year ago.
As it turned out, Motorola’s patent portfolio might have been undervalued, and so it should come as no surprise that Google—the company that started the bidding war on Nortel's patents—would swoop in and grab it, even if it comes wrapped in a hardware company. It’ll be interesting to see if Google throws away the wrapping or can make some kind of cool collage out of it.