Startup
Google plans to acquire Motorola Mobility for a total of 12.5 Billion USD for 40 dollars per share, a 63% premium. During a conference call, Larry Page (Google founder), Sanjay Jha (CEO of Motorola Mobility), and others answered questions concerning the acquisition. Both boards approved the deal unanimously and both companies have strong convictions that this deal will foster innovation, protect the android ecosystem, and provide value for shareholders of each company. The boards of both companies believe that this deal is competitive and will go through FCC filling process with a hitch.
Background
Currently the android system is adopted by 39 manufactures, runs on 150 million devices on 231 carriers, and 550,000 devices are activated daily. According to Canalys, Android reached 48 percent global market share. The android system launched in nov 2007. Motorola Mobility was a division of Motorola until it was spun-off as a separate entity in January of 2011. With over 80 years of radio and telecommunication experience, Motorola will provide invaluable experience for Google’s mobile arm.
Motorola committed to the android system in 2008 and is currently the market leader in Brazil and has a large market share in South America. Currently, Motorola Mobility holds 17,000 worldwide patents and 7,500 pending patents in wireless standards and non essential patents that protect Motorola’s competitive advantage.
The Good
Web usage is shifting to mobile devices and is center stage for growth. Google plans to capitalize on the industry by working more closely with hardware manufactures. The Android system will remain open source and no change in the android business model was announced. Google’s core business is not affected and is experienced in over 100 acquisitions.
The acquisition will follow the Nexus smart phone business model, where Google works closely with one manufacture to develop a flagship product that will launch before the holiday season. Google will work more closely with Motorola to develop and focus on enhancing the user experience while protecting/expanding the android ecosystem. Google discussed the acquisition with the top 5 android licensee companies, and all were enthusiastic for the deal. It will protect the android ecosystem, foster growth, and develop a stronger more competitive platform. All companies using the the android platform stand to benefit from any development on the core android system because of the open source nature of android. Android is about user choices and this acquisition is not a horizontal integration of the handset market, since Google holds very little stake in handsets. The most important benefit of this deal is Motorola’s patent holdings in protecting the android ecosystem from competitors such as Oracle, Microsoft, and Apple.
Potential Concerns
Though there is some dissent from users who suspect that Motorola will get a competitive advantage over other android adopted handset makers. The acquisition may push handset makers away from Android and towards other platforms such as Windows. Though it’s too early to tell if this Stanford based startup, Google, is taking the right approach or not.
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