As far as explosive developments in the world of technology go, Google’s $12.5 billion deal for Motorola’s Mobility business is tantamount to detonating a nuclear bomb . . . a big one.
Ownership of that company will hand Google substantial businesses that it has previously flirted with but never committed to. Notably, the business of producing and selling its own hardware for smartphones and tablets, and the not-insignificant side business of manufacturing and designing TV set-top boxes used by cable providers.
An authoritative voice on technology and consumer electronics, Joshua Topolsky is the founding editor-in-chief of The Verge, a technology news and information Web site, and the former editor-in-chief of Engadget. He is the resident tech expert for NBC’s “Late Night With Jimmy Fallon” and has appeared on CNN, Fox News, Bloomberg TV and G4’s “Attack of the Show.” A lifelong gadget enthusiast, Joshua used his first computer at age 6 (a Texas Instruments TI-99/4A), and has been breaking apart and reassembling gadgets since phones had rotary dialers.
Aug. 15 (Bloomberg) -- Dexter Thillien, a senior telecommunications analyst at IHS Global Insight, talks about Google Inc.'s agreement to buy smartphone maker Motorola Mobility Holdings Inc. for $12.5 billion.
The deal will also give Google badly needed patents on innovations and inventions that will help the company protect itself (and partners) from the kind of disputes it has had recently with industry monoliths such as Microsoft, Oracle and Apple. Without these patents, Google and its partners are squarely in the sights of those companies — all of whom use the claims as a kind of leverage against competitors.
But there are bigger questions here. Google licenses the Android operating system to phone-making partners such as Samsung, HTC and LG; how can Google turn around and compete with those companies? How will Google manufacture smartphones with Motorola while providing the newest innovations to partners that are now its rivals? And why exactly does Google — until now, a purely Web- and software-focused company — want to be in the hardware business?
Let’s start with a history lesson. Back in the salad days of the 1990s — long before anyone had dreamed of a phone that ran “apps” — Apple decided it could manufacture its own hardware, produce its own operating system and license that system to third parties at the same time. The company devised a scheme to allow other PC makers to create Macintosh “clones” (non-Apple machines that ran Mac software), and would also continue to build its own machines running the same operating system.
For a brief time, this provided a new revenue stream and increased visibility in the market. But in the long term, clones began to cannibalize Apple’s own device sales. After just two years, the program was halted. Who wants to compete with themselves?
Of course, Apple’s real hope was to compete with Microsoft in a market where it couldn’t gain dominance. Microsoft didn’t make PCs, it only made software. And that software gave the company about 95 percent of the worldwide PC market (a number it still pretty much hangs onto).
With the Motorola purchase, Google will be in a similar position, save for one important distinction: It already has market dominance.
Google provides Android to hardware partners at no cost and focuses only on development of the software. The company has been able to saturate markets with handsets running its operating system, and device-makers have managed to carve out a space for themselves among industry leaders such as Research In Motion, Apple and Microsoft by customizing on top of Android. This potent combination allows multiple manufacturers to make unique handsets and tablets in high volume for a variety of carriers. Google’s involvement in the operating system means money, consistency and support (and of course, lots of additional search traffic and ad dollars for Google).