Google plan to buy Motorola Mobility an explosive development in tech world

August 15, 2011

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.

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).

That relationship has been working for years, so why would Google want to rock the boat? The truth is, it probably won’t, at least not right now. For the short term, it behooves Google to operate Motorola as a separate arm rather than the lead hardware shop for Android products.

In the past, Google has partnered with equipment manufacturers to make flagship devices for Android, and project head Andy Rubin intimated that the process wouldn’t change once Motorola is on board. It’s the best of both worlds. The company holds the patents it badly needs to keep up a defense against competitors, and lets Motorola do what it does best: make devices. If there are thoughts that Google will play favorites with Motorola, there’s probably an equal if not greater sense of relief that the company has finally armed itself in the patent wars.

Still, it’s hard to see how Google and Motorola coexist as two separate companies in the slightly more distant future. Google will undoubtedly see advantages in using Motorola’s expertise to design hardware and software side by side. And Google will need to hold its market position against Apple’s tightly integrated devices and services, as well as the new partnership between Microsoft and Nokia. The landscape of the mobile industry is quickly becoming all about that synergy of hardware and software. Can Google ignore the trend?

The other piece that’s intriguing is also less obvious. Motorola holds a significant share of the cable-box market in the United States. Google has tried unsuccessfully to force its way onto televisions via Google TV — a sloppy product that was met with extreme resistance from the entrenched industry. As our TV technology and viewing habits evolve, Motorola could be the perfect Trojan Horse, allowing the search giant to sneak its way into U.S .homes — something Apple and Microsoft have been trying to do for years.

This deal might not mean a flood of Google-branded hardware is about to hit the market, but it opens a big new doorway for the company that will be difficult to avoid walking through. Make no mistake, the endgame is all about capturing the hearts, minds and dollars of a user base that is expanding exponentially. Suddenly, how and where we get our content or do our business — and the tools we use for both — is up for grabs on nearly every front. Major players are digging in for a long, hard battle — and Google just fired a big, noisy shot.

And hey, maybe we’ll get an Android-powered RAZR phone out of the deal, too.

Joshua Topolsky is the founding editor in chief of The Verge, a technology news Web site debuting this fall, 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.”

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