google motorola final

8/2/2019 Google Motorola Final

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SIMSR

Case Study Topic: Googles purchase of Motorola Mobility

GOOGLES PURCHASE OF MOTOROLA MOBILITY

Google and Motorola Mobility entered into a "definitive agreement" for Google to purchase

Moto's mobile hardware business. Google has paid around $12.5 billion, making the deal its

largest to date. The price breaks down to $40 per share.

Googles decision underscores a major shift in Google's strategy, one that stands to transformthe web giant from a company focused primarily on online services, such as search and email,

to a hardware manufacturer building phones, tablets and other electronic devices.

Why does Google want to buy Motorola Mobility?

One can imagine many reasons, but in press call, Google executives went to great lengths to

emphasize that the focus is squarely on patents. Google has been in the middle of a very bitter

battle over smart phone patents. Microsoft and Apple's recent purchase of patents from Novell

and Nortel seemed to be the straw that broke the camel's back; not long after that move,

Google Chief Legal Officer David Drummond wrote a scathing blog post in which he said thecompanies were "banding together" to use "bogus patents" as a "weapon to stop" innovation,

citing the numerous lawsuits against Android hardware manufacturers as evidence.

According to them, acquisition of Motorola will increase competition by strengthening Googles

portfolio which will enable them to better protect Android from anti competitive threats from

Microsoft, Apple and other companies.

With the Motorola Mobility buy, Google has got whopping 17,000 patents under its belt --

nearly three times the amount collected in the Novell and Nortel deals combined. Moto also

has about 7,000 other patents currently pending.

Owning a handset maker could improve Android, if it shortens the feedback loop for problem-

reporting and new ideas, but it could hurt the platform and its end-users more if it scared

off competing hardware vendors, shrinking the base to which new applications are written and

reducing the diversity of options available to end-users. As a proprietor of an open, multi-sided

market, Google needs to serve Androids hardware vendors, app developers, and end-users

well enough that a good-sized group of each continue to bring it value and so the end-users

watch the ads whose sale puts money into Googles pocket from it all.

The patent motivations are more straightforward. As we know, it doesn t take deliberatecopying to infringe a patent, and patents are granted on small enough increments of software

advance that an independently developed application may incorporate dozens to hundreds of

elements on which others claim patents, and at millions of dollars a lawsuit, its expensive to
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Yet patents are only part of the story, experts say.

The acquisition suggests that Google sees itself as unable to adequately compete in the

mobility market without its own handset manufacturer. Google's bet is that having greater

control over Smartphone software and hardware will help it move beyond the desktop and

beyond search.

Owning Motorola will allow Google, more than ever before, to create mobile devices that satisfy

the web giant's vision for what cell phones and tablets should be able to do. A new breed of

Motorola Smartphone could be designed from the ground up to integrate Google products at

every turn, from featuring the Google-plus social network to adding near field communication

chips that allow cell phones to be substituted for credit cards via Google Wallet.

Fundamentally, Motorola offers Google a bridge from the digital to the physical world, and with

it, a means of gaining valuable information about its users, such as their locations or what

applications they use the most.

Though Google said that it will continue to license its Android software, its mobile strategy will

cease being at the mercy of third-party handset manufacturers like HTC and Samsung.

Instead, Google will able to dictate the price, distribution and features of its own line of devices.

Google no longer has to put its future in the hands of companies that deliver mediocre Android

devices that damage the whole ecosystem. Apple's success was built on controlling its own

destiny and not relying on third parties to deliver its vision. Google is saying, "We're going to

deliver our vision as we see fit, much as Apple has.'"

Google also stands to bolster its efforts to gain inroads into the living room by spreading to

TVs. Google TV, which was unveiled last year but was unable to gain much traction, may stand

a better chance when paired with Motorola's set-top box offerings.

Until now, Google has been essentially hands off when it comes to hardware: it has offered its

Android software to manufacturers at zero cost, without a having a say in the form of the

phones Android will power. This disruptive and unorthodox strategy has allowed Google to gain

enormous market share in very little time, overtaking Apple to claim 48 percent of the global

Smartphone market.

To some extent, quality has been sacrificed for quantity as Android has expanded to more than

150 million devices made by more than thirty different manufacturers. Google frequently

updates its Android software, but app developers, manufacturers and carriers are not always

able to keep up, resulting in a proliferation of different versions of the Android operating system

offering a range of experiences for users. Depending on Google's relationship with the handset

manufacturer, or the manufacturer's approach to upgrades, a consumer could purchase a

Smartphone running outdated software, straight out of the box. Not all Android apps perform

equally on different versions of the software, an issue that has been a source of frustration for

users and developers alike.

Google's new approach -- controlling the Smartphone experience from end-to-end -- mirrors

the vertical-integration strategy Apple has pursed with spectacular success, but one that has

lately been a bust for the likes of Nokia and Research in Motion. Nokia, for example, recently
http://www.huffingtonpost.com/2011/07/12/google-plus-guide-tips-for-newbies_n_896350.htmlhttp://www.huffingtonpost.com/2011/05/26/google-wallet-google-offers_n_867533.htmlhttp://mashable.com/2011/08/02/android-market-share/http://mashable.com/2011/08/02/android-market-share/http://googleblog.blogspot.com/2011/08/when-patents-attack-android.htmlhttp://googleblog.blogspot.com/2011/08/when-patents-attack-android.htmlhttp://www.mobileindustryreview.com/2010/06/developer-on-android-fragmentation-really-frustrating.htmlhttp://www.mobileindustryreview.com/2010/06/developer-on-android-fragmentation-really-frustrating.htmlhttp://www.mobileindustryreview.com/2010/06/developer-on-android-fragmentation-really-frustrating.htmlhttp://www.mobileindustryreview.com/2010/06/developer-on-android-fragmentation-really-frustrating.htmlhttp://googleblog.blogspot.com/2011/08/when-patents-attack-android.htmlhttp://googleblog.blogspot.com/2011/08/when-patents-attack-android.htmlhttp://mashable.com/2011/08/02/android-market-share/http://mashable.com/2011/08/02/android-market-share/http://www.huffingtonpost.com/2011/05/26/google-wallet-google-offers_n_867533.htmlhttp://www.huffingtonpost.com/2011/07/12/google-plus-guide-tips-for-newbies_n_896350.html


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ceded its top spot as the world's largest Smartphone vendor to Apple and announced it would

retire its Symbian operating system in favor of Microsoft's Windows Phone software.

Google is staking billions on its ability to successfully control both the software and hardware

components of its company's devices -- all while not alienating its partners, who have been

instrumental in Android's rise and with whom Google will directly compete once the Motorola

acquisition is complete.

Google has had history of picking favorites, but it has never directly competed with

manufacturers. Manufacturers have come out with statements of support. But what's said in

public is one thing, and what's said behind closed doors is another.

How will Google run Motorola?

Google says that it will run Motorola as a separate business. According to them after the

transaction, nothing changes -- its business as usual. It's about protecting and extending theecosystem.

Owning Motorola will not only give Android a kick, but will enhance competition and offer

consumers greater choice. It will, of course, be interesting to see how that argument shapes

up. The biggest question will focus on whether or not a Google-owned Motorola will get

preferential access to new versions of Android before other manufacturers. Whatever happens,

its going to take Google some time to get this deal done, and if it does get approved, we can

expect some significant regulatory concessions.

Why is Google willing to pay a 63% premium?

M&A is all about taking risk. And Google can afford a lot of it.

Although the amount of the reverse termination fee is stunning, the concept of such a

payment is not unusual. If a deal is spiked for regulatory reasons, a seller frequently wants a

no fault divorce the buyer writes a check to the seller, and walks away. In Googles case,

the percentage of the payout is a near-record.

The reverse break-up fee is a strong statement of Googles confidence that the deal will close

in the timeframe allowed under the merger agreement, Google said in a statement.

Generally, if a company triggers a reverse termination fee, each side walks away amicably.

Everyone agrees thats the end of the fuss and the payouts. But Google has agreed to much

more than a no fault divorce and a termination fee.

Even if Google doles out the $2.5 billion, it could be liable for as much as a $1 billion MORE if

the company violates its obligations under the agreement to use reasonable best efforts to

obtain the regulatory clearance.

(One sticky problem: No one knows exactly what the reasonable best efforts standard means,

but a judge trying to figure out what is reasonable would probably consider that the parties hadput a total of $3.5 billion at risk).
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That brings Googles total potential exposure to around 28% of the purchase price. But, wait!

Theres more. If Motorola Mobility thinks Google has violated the agreement, before it tries to

collect that $3.5 billion, it can try to get a court to specifically enforce Googles obligations with

an injunction.

So Google owes 20% of the price if there is a no fault divorce, but if Google is at faultand

found to have failed to properly pursue the dealthe at fault divorce price could be either an

injunction or 28% of the price. And that is much more than the standard reverse termination

fee.

Theoretically, Googles liability for damages could have been unlimited, but how likely is it that

a regulatory blockage is going to cause damages much more than 28% of the purchase price?

What does it all mean? It means Google has to make the regulatory approvals happen for this

deal, almost no matter what the consequences are.

It also means, even more than in thecase of AT&Ts proposed takeover of T-Mobile that the

antitrust cops are in the drivers seat. They can get just about anything they want from Googleif they think it is appropriate from an antitrust perspective.

Rest assured the government will be fully aware of its power. Google must have wanted this

deal very badly.

Would Google actually derive value from this transaction or is there a hidden intention behind

this deal?

Home to major leading smartphone manufacturers, Koreas industry observers have been

following the deal closely, but not everyone sees the acquisition in the same light. While somebelieve that Google has made a move to protect the patents owned by Android makers and

distributors, others suspect that Google has set itself up for a future monopoly over Android

software.

One of the key reasons for Google to buy Motorola Mobility is the stack of patents the company

has, as Motorola was one of the companies behind the very first cell phones and much of that

technology is what today's handsets are building upon. It's also important to remember that

Motorola Mobility makes a range of other products such as optical networking solutions for

digital cable TV and internet, something else which ties in nicely with Google's overall

businesses. It's no doubt that this will have some interesting developments for consumers aswell and if nothing else, we'll hopefully be seeing better support for Motorola's Android

handsets when it comes to version upgrades of Android.
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According to Google, this deal is about Motorolas 17000 plus patents to

protect the Android operating system from legal challenges. How would

Apple react to this news and what does the deal mean to other smart phone

manufacturers?

According to Google, nothing will change in terms of Android's open approach to mobile

development. Android head honcho Andy Rubin said he had talked to the "top five licensees"of Android software and that they "all showed enthusiastic support." Samsung, Sony Ericsson,

HTC, and LG all issued their own statements of support as well, though it's hard to read too

much into that type of bland and carefully crafted PR-speak

The early signs are that investors dont believe that a Google buyout of Motorola Mobility will

significantly hurt Apples business. But is that really the case? Once the Google-Motorola

partnership gets going, Apple may find it has to work even harder to maintain its position in the

mobile industry.

Googles blockbuster deal to acquire Motorola Mobility for $12.5 billionhas set analysts, criticsand industry observers on a tear predicting what might happen across the industry. But it was

Apples stock price following the announcement that perhaps stirred the most speculation

about what the future might look like for companies in the mobile space.

Following the announcement of Google acquiring Motorola Mobility, Apples shares gained. On

Aug. 16, the shares were initially down, sparking some to wonder if investors are becoming

gun shy by Googles news. However, it seems that the dominant thought on both Wall Street

and Main Street is that Apple will be totally unaffected by the deal. When its all said and done,

the iPhone maker will still sit atop the mobile space with no real threat from Google or Motorola

Mobility.

But that might not be the case. As powerful as Apple is, and as important as its iPhone and

iPad are to the mobile space, the company will be affected by the acquisition.

How? Lets see:

1. Motorola was on its heels

Motorola Mobility was doing a fine job of competing against Apple and all other competitors in

the mobile space prior to the acquisition. The companys line of Android phones were well-built,

priced affordably and generally some of the better options for those who didnt want an iPhone.

Now that Motorola Mobility will have Google behind it what makes anyone think that its level of

quality wont only improve?

2. Google has the cash

One of the biggest issues with Motorola Mobility has been its inability to invest the kind of cash

in its platforms that Apple has in the iPhone to keep competitors at bay. But now that Google

will be putting its cash up to help Motorola Mobility, all bets are off. It shouldnt surprise anyone

if Motorola offers up some vastly improved devices featuring forward-thinking technologies that

could put Apple on notice. It seems now that a spending war is sure to happen.
http://www.eweek.com/c/a/Mobile-and-Wireless/Google-to-Buy-Motorola-Mobility-for-125-Billion-601211/http://www.eweek.com/c/a/Mobile-and-Wireless/Google-to-Buy-Motorola-Mobility-for-125-Billion-601211/http://www.eweek.com/c/a/Mobile-and-Wireless/Googles-Motorola-Mobility-Buyout-10-Possible-Outcomes-835652/http://www.eweek.com/c/a/Mobile-and-Wireless/Googles-Motorola-Mobility-Buyout-10-Possible-Outcomes-835652/http://www.eweek.com/c/a/Mobile-and-Wireless/Google-to-Buy-Motorola-Mobility-for-125-Billion-601211/


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3. Consider the Android issue

Over the last few years, customers have grown increasingly fond of Android to the detriment of

iOS, BlackBerry OS and other mobile platforms. Now that Motorola Mobility is on Googles

side, expect that issue to become even greater for Apple as consumers warm to the idea of

having products designed and sold by Google. Make no mistake, Googles brand means

something in todays marketplace and it could help improve Motorola sales and thus hurt sales

of other products, including the iPhone.

4. Now two Android vendors are threats

Its important to note that for the most part, Samsung was Apples only major threat in the

mobile space. That company was nearing quarterly Smartphone sales that matched Apples.

But now that Motorola is working with Google there is good chance consumers will buy more

Motorola devices. Apple must now worry about the size and growth of two competitors. Simply

put, Apples concerns in the mobile space just doubled.

The shareholders of both companies have voted in favor for acquisition, although it still needs

to pass the scrutiny of the SEC and some other instances. It's an interesting move by Google,

especially as the company still has several other major handset vendors that may or may not

turn elsewhere for their device OS needs in the future, all depending on how Google handles

things.We should be quick to point out that Motorola Mobility will remain a separate entity from

Google and it won't be part of the Google branded companies. However, we can't but wonder

what benefits Motorola Mobile will see from this close relationship with Google and if Google

wants to keep its other Android partners happy, it's going to have to make sure that Motorola

Mobility doesn't get any special treatment, something that doesn't sound very likely.

On the other hand, there are only so many options when it comes to alternative smartphone

operating systems that consumers would deem acceptable over Android. It's clear that both

Microsoft and HP have an opportunity here and as far as Samsung goes, the company already

has its own platform in the shape of Bada. It will be interesting to follow how things unfold, but

at the moment HTC, LG, Samsung and Sony Ericsson are all still behind Android and have

commented that Google's purchase of Motorola Mobility is a positive thing for Android in

general.

The Acquisition Increases Mobile Search/OS Competition

Imagine the questions that Nokia, LG, HTC, or Samsung must have. Up until this morning,

Google was your partner: they made handsets cheaper by providing a free and open operating

system, and they made it easy for developers to make apps for your phone. Handset makers

had no problem with allowing Google to make ad revenue with Google search plastered all

over the phone by default. Suddenly, Google is their newest competitor, and they have to be

asking questions like, "Should we continue to give ad revenue to a (now) direct competitor?

Should we follow Verizon's lead and make more phones powered by Bing on Android?"

Expect Windows/Bing-powered phones to appeal more to device makers; we will see aboutwhether they can pass such a preferences on to consumers.
http://www.eweek.com/c/a/Mobile-and-Wireless/Google-Motorola-Deal-Will-Affect-Android-Battles-Windows-Phone-103330/http://blogs.computerworld.com/17070/microsofts_bing_displaces_google_on_another_verizon_android_phonehttp://blogs.computerworld.com/17070/microsofts_bing_displaces_google_on_another_verizon_android_phonehttp://www.eweek.com/c/a/Mobile-and-Wireless/Google-Motorola-Deal-Will-Affect-Android-Battles-Windows-Phone-103330/


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Hardware Isn't Software

In many markets, Google is dominant in search, but this is their first real forray into hardware. It

could be argued that this isn't vertical integration at all - it's an entirely new, closely-related

vertical. Google's expansion into online services like travel, email, and social media contrasts

sharply with the Motorola deal. Regulators are concerned when an industry is dominated by a

single entity. Motorola is, by no means, dominant in the mobile handset industry. In fact,

they've been getting killed until recently.

The bottom line is that consumers' choices remain almost unchanged by the deal. Sure, we

probably won't be seeing those Windows 7 devices by Motorola, but they were likely to be a

very small percentage of one company's sales. The deal has almost no impact on Google's

search market share (most Motorola phones used Google search already), nor does it alter the

market share in the handset industry at all.

What are the other possible legal and regulatory concerns which Google might face from this

deal? Do Regulators Care?

The larger the company, the more scrutiny it will receive. Many regulators conform to the

popular mentality that "big is bad," and feel the need to protect (or at least appear to protect)

the all-powerful and nebulous "little guy." Expect the merger to be tied in red tape for several

months while it is examined and scrutinized from every angle, with particularly sharp criticism

from the EU.

This move by Google will likely draw sharp scrutiny from federal antitrust regulators already

engaged in a probe of the search giant's business practices.It won't go through without a fight.

Federal regulators are expected to focus on whether Google's control of both hardware andsoftware in the Smartphone market would give the company an unfair competitive advantage in

areas like mobile Web search. The takeover could also allow Google to outmaneuver other

handset manufacturers currently using the Android system.

The Federal Trade Commission is currently investigating whether Google has used its

dominance in Web search to unfairly or illegally promote its own online businesses at the

expense of rivals. FTC investigators are also looking at whether Google pressured carriers of

its Android system to give preference to the company's other mobile products and freeze out

competitors. Google acknowledged the existence of the probe in June.

Google's high profile could lead regulators to demand concessions before the deal is approved.

Such concessions could include close federal monitoring of the Android marketplace for

several years after the deal closes.

Intense competition in the mobile handset market, and Google's pledge to keep Android open

source, make it unlikely that the government will stop the deal. Google has also touted the fact

that all five of the largest handset manufacturers currently using the operating system have

endorsed the deal. Government would be hard pressed to make the case that this is anti-

competitive.
http://en.wikipedia.org/wiki/Motorola#Financeshttp://online.wsj.com/article/SB10001424053111904823804576500544082214566.htmlhttp://online.wsj.com/article/SB10001424053111904823804576500544082214566.htmlhttp://en.wikipedia.org/wiki/Motorola#Finances


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Conclusion

In a world where information is literally at your

fingertips, one corporation reigns supreme: Google Inc.

or atleast they will one day. After Googles latest

acquisition of Motorola, the question of if Google will

rule the world has become when instead.

They can use the following strategy.

If I had to guess, I would say Google will have the world

under their thumbs by atleast 2030. Furthermore I think

their takeover will be silent . one day well just be

surfing the internet playing the wiki game and the nest Google doodle will have them

celebrating the one-year anniversary of when they took over the world.

If you view Google conquest as a game of Risk(the game of world domination) then Google is

standing in the position of owing Africa, Australia and all of South America. They have aborderon all of the major continents and can attack from any direction.

Google has made a solid step in the right direction by buying Motorola (aka Europe, in this

hypothetical game of risk). Now there will be a whole sect of people who Google can track and

research as they decide wich plan of action will be best to take over the world.

To continue this path Google can begin taking over Asia, a disjoint number of different phone

distributors (territories) and they can start with buying out the new AT&T and T-Mobile merger

and continue acquisitioning corporations until finally taking over Apple (their main competitor in

world domination).

Their last step in world domination is a waiting game. By the time Google has taken over

different corporations, all they have left to do is wait for North America to lose defenders

against its massive borders until Google can sweep in and buy them out.

The new powered by Google would be a plus for everyone. As peoples lives move into the

virtual sphere there is no better person to take charge thata corporation who specializes in

virtual worlds.
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