Well, who could’ve predicted this? Oh, right. Ron. Google is getting into the hardware game with an announcement today that Google intends to buy Motorola Mobility. And everything that entails. Which is actually quite a lot. The move is huger than it looks at first glance. And the first glance already looks pretty big.
According to Google, they will be operating Motorola as an independent entity, which in theory should help preserve competition and allow Google to operate as an unbiased entity when dealing with their other handset partners. That’s the idea anyways. It’s unclear if Motorola will receive any special treatment or insider peeks into future Android devices. Typically that’s been the purpose of the Nexus series of devices which, Gizmodo reports, is a device manufacturers need to bid on to get the privilege of building. Motorola, Google says, will still have to bid like all the other manufacturers.
The changes aren’t insubstantial though. Google said on their blog that they bought Motorola Mobility to “supercharge the Android ecosystem”. This can be roughly translated to “light a fire under other manufacturer’s asses”. This is both a good and a bad thing. On the one hand, competition tends to improve consumer experience. On the other, Google is now competing directly with their licensees with the explicit purpose of escalation. They intend to outdo other manufacturers, which could make some future negotiations rather cranky.
This change also means that for the first time, Google will have a significant source of revenue that’s not advertising. Motorola Mobility is a hardware manufacturer and, as such, has to make money on sales of physical products, not information. Google now has a direct line to retail stores, supply chains, manufacturing facilities, all of which Google needs to maintain a profit on. Fiascos like the lack of a phone-based customer support line for the original Nexus One will be entirely inexcusable now (not that they were before). Google can’t afford to pour money into their handset division without turning a profit. Motorola, despite their fantastic success with the Droid and their rebound from bankruptcy, has still struggled to make it back to the top of the handset game. That’s now Google’s responsibility.
Perhaps the most dramatic change this move means, however, is in the volume of patents that Google has acquired. As we discussed in episode 39 of the podcast (that show’s coming up a lot recently, isn’t it?), historically, Google has not had that great of a patent portfolio. With the acquisition of Motorola Mobility, Google has added a whopping 17,000 patents to their hand. For comparison, the recent IBM patent acquisition brought in a paltry 1,000 patents, and that was still seen as a substantial addition to Google’s meager portfolio.
Google has entered a lot of arenas with this purchase that they have previously stayed out of. Manufacturing, advertising, retail, patent wars. These are areas that their primary competitors, Apple and Microsoft, have long since courted. It’s typically been a weakness of Google’s, in that if they want to release a new device, they need a slew of partners to help them do it. Just look at Google TV or Chrome OS which both required outside entities to help them build their ideas. While Microsoft still licenses Windows and WP7, their Xbox and Zune divisions have given them a hand in the manufacturing business, while Apple has always built everything themselves. And now it’s Google’s turn.
It remains to be seen just how many people this is going to piss off, or whether or not Google can pull this off successfully. If it works, though, Google will become more of a peer with their competitors than they’ve been before. And their peers are huge.