Google has decided to acquire Motorola Mobility for $12.5 billion. In the first place, this is a great opportunity for Motorola. With Google’s cash and control of Android, Motorola will be better positioned to compete in the smartphones segment.
In the second quarter of 2011, Motorola shipped 4.4 million smartphones worldwide and was the eighth biggest smartphone player with 4.1% market share. Motorola is a major Android manufacturer and this acquisition will allow the company to focus on differentiation as this is becoming key to succeed in the much crowded Android space.
This acquisition will also help Google in several ways. First it will give Google access to Motorola’s patent portfolio and allow it to fight back some of the patent infringements that Android is currently facing. Motorola is one of the pioneers of mobile phones, and along with Nokia and Ericsson it has one of the biggest and most profitable phone patent portfolios in the world.
Secondly, Motorola has an important set-top box business, which will help the GoogleTV service to expand. Google also becomes a consumer electronics manufacturer with the deal, which may open new opportunities in the future.
However, this acquisition also indirectly benefits other market players, namely Microsoft and Nokia. The deal will make most Android players realise how dependent they are on Google and how quickly Google’s plans can change their businesses. Samsung, HTC, and Sony Ericsson may now look at other platforms as a way to diversify the risk of being so dependent on one platform.
Increasing their Windows Phones portfolio may now be a need in the long term. These companies don’t want to see Google as their main partner and main competitor at the same time. Ultimately, we don’t believe this acquisition is a first step for Google to close Android or to make it exclusive to Motorola.
Google needs players such as Samsung, HTC, Sony Ericsson and others to continue growing Android’s installed base. The platform was developed to leverage Google’s revenues through services but not to become its main source of revenue through licenses. Nevertheless Google’s future plans for Android will have Motorola business in mind, which will benefit the company and allow it to differentiate from other Android competitors.
For Microsoft and Nokia it is extremely important that other manufacturers support and launch Windows Phones as this will raise awareness of the platform among consumers. This acquisition may be the catalyst for companies to reduce their dependence on Google’s platform to face future market challenges.