Google surprised the entire tech industry last night by announcing it is acquiring Motorola Mobility, the maker of Droid smartphones and Xoom tablets, for US$12.5 billion in cash.
This move, the largest acquisition to date by Google, is significant for many reasons.
First, by spending a significant portion of its US$39 billion war-chest, Google has sent an unambiguous signal about the importance it places on mobile devices.
Google, it would seem, has every intention of remaining a major player in the mobile space.
The move to buy Motorola Mobility gives Google greater access to the development of Android-compatible handsets, in addition to its existing software-development capabilities.
But more importantly, this deal gives Google a major boost in its patent battles with Apple and Microsoft.
Motorola, founded in 1928, is one of the oldest telecommunication companies in the world and its handset division pioneered some of the earliest mobile phones.
Its StarTAC, and then RAZR phones ruled the market for a while before losing significant market share to more nimble competitors such as Nokia and Samsung.
A disastrous short-lived tie-up with Apple in 2005 did not help either, particularly when the latter went on to unveil the iPhone in 2007, poaching several Motorola executives in the process.
Motorola split in 2010, announcing that the handset division would trade as a new entity called Motorola Mobility in 2011.
Motorola saw its salvation in Google’s Android smartphone platform and went all in, moving completely away from its own proprietary system.
It was one of the founding members of the Open Handset Alliance (OHA), championed by Google in 2007 to provide direction to the development of Google’s Android mobile operating system.
Yet, despite its well-received Xoom and Droid devices, Motorola made a net loss of US$79 million in 2010.
With Android, Google seemed to have been following the well-trodden path created by Microsoft for Windows, developing the operating system to be adopted by a number of hardware partners. However, it was evident that the same strategy was not working well.
Handsets with different capabilities and configurations supporting different versions of the operating system caused the Android ecosystem to be fragmented.
Device manufacturers tried to differentiate by providing custom interfaces on top of Android, thereby fracturing its identity.
The patent lawsuits did not help either. In fact, everyone in the mobile space seemed to be suing everybody else.
Manufacturers adopting Android seemed to be at the receiving end the most lawsuits, with HTC having to settle with Microsoft, and Apple winning an injunction against Samsung’s Android-based Galaxy tablets in Europe recently.
Google’s Chief Legal Officer, David Drummond, recently started an argument when he accused other technology companies of waging a “hostile, organised campaign”.
As reported recently on The Conversation, Australia hasn’t been able to escape the patent wars, becoming the battleground for a stoush between Samsung and Apple.
Further deterioration of this situation would push up the cost of manufacturing Android phones and drive the manufacturers toward Microsoft.
It was, therefore, imperative for Google to make such a decisive move.
With its purchase of Motorola Mobility, Google has gained ownership of around 14,600 granted patents central to technologies used in wireless communications.
With such an extensive patent portfolio, Google has not only shored up defenses for its partners in the OHA but has also gained the clout to force a truce in the ongoing mobile patent wars through cross-licensing agreements.
Specifically, Google might now wield enough power to propose an intellectual property share with Apple and others, potentially keeping the companies from suing one another.
The clear winner in this aquisition is Motorola Mobility which will still trade as a separate entity under Google.
While Google has assured other partners that “Android is still open”, Motorola may end up as a preferred partner, particularly for developing Google’s line of Nexus phones.
Apple and Microsoft might also start to consider the cost of running lawsuits against opponents backed by a formidable patent portfolio.
For consumers, such a cessation of patent hostilities would be welcome news, ensuring mobile device manufacturers focus on introducing innovative gadgets rather than suing each other out of existence.
Ultimately, that may be the best outcome of all.