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Google has taken an important first step towards finalizing its acquisition of Motorola Mobility. Today the European Commission, the European Union's version of the Federal Trade Commission, approved the merger. The commission granted the approval, "mainly because it would not significantly modify the market situation in respect of operating systems and patents for these devices."
The rest of the regulatory chips should fall in line for Google and Motorola after E.U. approval. The merger still needs to be approved in the U.S., China, Israel and Taiwan, but the logic of the European Commission is sound. Motorola only took 2% of profits from the entire mobile industry last year. From an anti-trust perspective, Google could buy Sony Ericsson and LG and still not come anywhere near the combined market share of Samsung and Apple.
Update: The U.S. Department of Justice has also approved the acquisition. See below for details.
If all goes according to plan, the same company which last year asserted that patents were essentially legal weapons in an unfair war against the Android operating system, will find itself the owner of one of the largest technology portfolios anywhere in the world. Today, Google took steps to assure many of Motorola Mobility's (MMI) existing licensees that it would adhere to that company's existing reasonable and non-discriminatory (RAND) licensing practices for mobile technologies.
This after Apple sent a letter to a European Telecommunications Standards Institute last November 11 - as first reported by Dow Jones this morning - complaining that Google had not been forthcoming about what constitutes "reasonable" with respect to royalties.
According to the Patent Examiner, a company called Innovatio IP Ventures is suing individual branches of hotel chains for use of Wi-Fi. Though I'm staunchly against software patents – and by extension software patent lawsuits – I think this is a good thing.
The company is launching a "systematic campaign" according to Matthew McAndrews, the lead litigator for Innovatio. The company is trying to shake down "several hundred" defendants for $2,300 to $5,000. Says McAndrews, "We want you to continue to use this technology, we just want our client to get his due share. This is not a seat-of-the-pants, fly-by-night shakedown."
Last Thursday afternoon, in response to a softball question from Salesforce CEO Marc Benioff on the subject of the relationship of Google's proposed takeover of Motorola Mobility to the ongoing patent wars, Google Executive Chairman Eric Schmidt cleverly avoided linking the two. In fact, he suggested that Google was more impressed by the company's phones and their engineers than with its patent portfolio. "We're actually very excited about the product line and so forth," Schmidt told Benioff. "To use the Motorola brand and product architecture, and the engineers and creative people - these guys invented the RAZR!"
For those who may have already forgotten, the RAZR was perhaps the last trendy, fashionable phone prior to the iPhone. Launched in 2004, it was the U.S.' top seller for nearly three years, but that fact didn't help Motorola very much financially. And as far as design was concerned, the product line was not without its defects. No, it's hard to believe that RAZR engineering was the key selling point for Schmidt and Google.
Regardless of the size of the regulatory hurdle that the Google takeover bid for Motorola Mobility may be for the United States, the hurdle for Europe will be a formidable one. This despite the fact that both are American companies; they do business on a global scale, with global telecommunications partnerships. While the standard that any merger or acquisition must meet for U.S. regulatory approval typically boils down to, "It's good for business," the standard for Europe is, "It increases competitiveness."
That's hard to prove, especially given the fact that mergers typically result in one less company. But for the E.U., prospective merger partners must conclusively demonstrate that the state of the market following their combination would be more competitive than the state of that market if they had merely partnered. If Google was interested in aiding its case, it could decide to postpone many of the Android platform's planned improvements until after the merger. That could be at least 18 months, perhaps longer. We ran this theory past the mobile industry's leading expert, NPD Group Executive Director of Industry Analysis Ross Rubin, to get his reaction and to see whether he agreed that such a lull, were it to occur, could send the wrong signal to Android developers. (Part 1 of our discussion appeared in RWW last Friday.)
Google characterized it as "Supercharging Android." Whether you subscribe to that characterization of Google's takeover bid for Motorola Mobility may depend upon which end of the Android ecosystem you're standing on. One of the factors that made Android such a strong challenger to Apple's iOS is its open and diverse distribution model. Regardless of the outcome of Google's bid, that model will change.
How much more likely are developers and partners to support Android next week than last week, now that they know Google is positioning Motorola to be the system's premium brand? What does Google gain from being a serious (read: "forget the Nexus One") manufacturer of Android over and above what it would have gained just as a promoter? And what does this move mean for Android supporters who had intentions to move the system beyond mere smartphones? ReadWriteWeb posed these and other questions to NPD Group Executive Director for Industry Analysis Ross Rubin on Thursday.
"Our technology is used in every mobile phone," reads a leaderboard-style ad on the home page of InterDigital, a wireless technology company that holds some 8,800 critical patents. An independent assessment last April of the relative value of communications companies' patent portfolios by equity market analysis firm Ocean Tomo LLC rated the key 4G and 3G patents held by InterDigital (of which there are about 20) as about 4% more valuable, and 6% more relevant to significant communications platforms, than Nortel's 20 key patents.
Financial analysts last week had perceived an upcoming InterDigital patent auction as a key opportunity for Google to pull itself back to par after having lost both its bids for the Nortel and Novell portfolios. But that was before last Monday's announcement of Google's intent to acquire Motorola Mobility (MMI).
Yesterday Google announced that they would be acquiring Motorola (here's why they did it). But we wondered what you thought about the marriage, so we asked you, "How do you feel about the acquisition of Motorola by Google?"
You answered and we culled your responses from Google Plus, Twitter and Facebook, and used Storify to present it all back to you. If you have additional responses, please leave them in the comments.
There is a middle ground in Google's acquisition of Motorola Mobility that is not just about just patents. It is not all about Google controlling its own original equipment manufacturer. Nor is it about solely defending the future of the Android ecosystem. This is about Google's standing in the mobile industry, the greater technology environment and its bottom line.
Google had very healthy second quarter earnings. Yet, it missed Wall Street expectations and the stock has taken a hit. Advertising accounted for 96% of Google's revenues, with near 66% of that on Google's own sites. Overall, Google's revenues were $6.82 billion. Google's investment in Android "is not material to the company" meaning that Google spends little on Android yet gets a decent return on its investment. Yet, there is a powder keg of money under Android and Google is seeing next to none of it in proportion to the ecosystem. So, Google needs to protect the future of Android for the value of mobile search it can advertise against. There are untold billions that Google could tap if it was more vertically integrated. Enter Motorola.
The most open thing going on in the Android realm today may be warfare. Today's announcement of Google's intent to acquire Motorola Mobility, the producer of many Android phones and a prominent contributor to the Droid brand, points to a new and severely altered landscape for mobile apps where absolutely every platform is controlled by a principal corporate entity that is directly partnered with, owns, or is a phone maker.
"Google has drawn some lines in the sand by essentially becoming a competitor to OEMs with whom it has previously aligned as a partner," says Yahoo Canada technology analyst Carmi Levy. "If you're in the corner office of Samsung or HTC, your world just became a lot more complex. They need to consider whether they want to continue contributing to the growth of what is now going to be their largest competitor."
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