The Forthcoming Google/Motorola Patent Fiasco
This Motorola deal continues its downward spiral. It’s already a bad — some might say awful — deal from a pure business perspective. But now the seemingly lone bright spot of the deal for Google — the patents — are turning into a headache as well.
Bloomberg only mildly touches on some of this, Daniel Eran Dilger of AppleInsider and Florian Mueller of FOSS Patents go deeper. Of note: if Google is committed to staying the course with Motorola’s patent licensing strategy (which they say they are), they’re going to find themselves enforcing patents related to H.264, the video codec that Google itself is trying to kill with WebM.
They also may find themselves suing Apple over patents and demanding a royalty for each iPhone sold.
The problem Google is likely to face is that if they aren’t agressive with the patents in the way that Motorola has been, how can they possibly hope to license them in the way they say they will? Who would license something when they don’t have to? This is a slippery slope.
Bigger picture: after going on and on about the dubious patent tactics by rivals like Apple and Microsoft (and rightfully so in most cases), Google may find themselves in the same position thanks to this Motorola deal.
Google, The Patent Pusher?
Charles Arthur of The Guardian makes the case for why Google will have to get aggressive with their patents, lest the Motorola deal look like one of the worst purchases in recent years — maybe ever.
Writes Arthur:
The really profitable bit of the business is the “Home” division, which makes set-top boxes, but has been bumping along at around $900m revenues for the past year. It actually makes money - only around $60m per quarter, but at least it’s profit, compared to the consistent losses in the mobile business, which has only made a profit in two of the past nine quarters. Even so, it would take 75 years for the Home business’s profit to make back the money Google paid for the business.
In other words, in purely financial terms, MMI is a dog.
On the face of it, the Motorola deal is such a bad one for Google that it makes absolutely no sense. But one level deeper, when you consider how badly Google was getting screwed in the patent bidding wars, it actually almost seems like they had to do this deal — and that Motorola chief Sanjay Jha knew it.
The problem Google faces is that this reality doesn’t translate easily to shareholders. They’ll see Motorola dragging down Google’s numbers and wonder what the hell they were thinking with the buy?
Even if Google spins out Motorola, it will look bad.
That’s why Arthur’s argument isn’t totally crazy here. I still doubt Google will become a patent pusher — though you could have said the same about Microsoft a couple decades ago — but I think that’s the most obvious way to show what they got out of the Motorola deal.
Samsung's Q4: $4.7 Billion In Profit
In other words, they’re the bizarro-Motorola.
Or, put another way, in order to acquire such a company at the market price Google sets, it would take something like $14 trillion.
What $12.5 Billion Buys You These Days
Motorola warned their Q4 numbers would be bad. And boy are they ever. A rundown:
They shipped — shipped, not sold — 5.3 million smartphones in the quarter. As a reminder, Apple sold 37 million.
For the full year, Motorola shipped — shipped, not sold — 18.7 million smartphones. As a reminder, Apple sold 37 million smartphones last quarter.
They shipped — shipped, not sold — 200,000 tablets last quarter. TWO HUNDRED THOUSAND. As a reminder, Apple sold 15 million tablets.
For the year, Motorola shipped — shipped, not sold — 1 million tablets. As a reminder, Apple sold 15 million tablets last quarter.
The company lost $80 million in the quarter — $70 million of that was by the mobile division. The unit lost $285 million for the year.
This is a company that Google is buying for $12.5 billion.
Sanjay Jha is a wizard.
One Out Of Three Ain’t Bad…
All we’ve heard for the past year-plus is how Android is killing it. The phones are taking over the world. And that’s true — from a unit perspective. But from an actual business perspective, things are decidedly murkier. Google says they’re making a good amount of money as a result of Android, but it’s clearly nothing compared to their main business. The carriers are doing well too — but carriers always do well. Being overly greedy tends to have this effect. As for the OEMs… well, that’s a different story.
The three largest Android OEMs are Samsung, HTC, and Motorola. Samsung just posted record quarterly profit. So far so good. But HTC just reported its first profit drop in two years. And Motorola just warned that its 4th quarter sales were going to miss as well. When you have to warn ahead of actual earnings, that’s a very bad sign.
So one of the three top Android OEMs is doing well. The other two are doing poorly. This matters because of what it means for the future.
We are currently assessing this source code, and over the next month we will be determining which devices will get the upgrade and when…
Motorola explaining their next steps to release Android Ice Cream Sandwich
To an 99.9% of end users, this entire thing must read like pure Latin.
Actually, scratch that.
Pure gibberish.
Worse, when translated, this clearly means it’s going It’s to be months before any Motorola Android user gets ICS.
This entire post encompasses Android’s true fragmentation problem wrapped in one big shit-stained bow.
An Update On Our Motorola Acquisition
Google is not having a very good day.
"Following"
Hugo Miller:
Direct discussions between the two companies about the future of Motorola Mobility’s patent portfolio had begun in early July following Google’s failed bid to buy Nortel Networks Corp.’s patents, according to the document.
But wait, I thought the whole Nortel thing was a ruse, a rope-a-dope. It simply could not have been the catalyst of this deal. Motorola must be lying in their regulatory filing. They were conspiring with Google for years to make Apple look foolish and spend billions on patents for no reason.
Also, the notion that Andy Rubin was brought in at the last second is bullshit. As Miller’s report suggests, he led this deal.
Motorola Mobility Faces Suit Over $12.5 Billion Google Sale
You see this headline and you think, okay, everyone knew the lawsuits were coming. But what’s crazy is that it’s from a Motorola shareholder who claims that the company did not get the best price possible.
Um. Was he holding out for $100 billion? Maybe an even trillion? Who the fuck was going to pay more than the insane amount Google just laid down for a dog with fleas?
While the shareholder cites Motorola’s recent revenue growth (thanks to Android) he fails to mention that the company actually lost money last quarter.
This is the biggest deal Google has ever done. It’s bigger than any deal Microsoft has ever done. It was a 63% premium over the stock price. And it’s in all cash.
What a joker.
As odd as it may seem, it’s increasingly likely that — come March 2012 — Google could be trying to consummate the acquisition of a company that’s legally barred from importing Android devices into the United States. How’s that for a dowry?
Florian Mueller with a timely update on the Microsoft case against Motorola.
The last laugh? I dunno, if that happens, it would be one of the craziest situations I can recall in the tech space.
This is clearly something to mark down and check back on.
Motorola's Jha Could See $62 Million If He Exits
Well, this lends some credence to the notion that Jha may have helped push Google towards an outright acquisition instead of just a patent buy or licensing agreement. It’s certainly interesting that just days before the deal was done, Jha was suggesting that Motorola could go after other Android players over IP.
This also suggests that Jha could well see as much as $120 million over the past three years if he exits. Which in turn suggests he might not stick around Google/Motorola for long.
And that’s all for running a company that’s losing money. But it’s hard to argue with the fact that he provided a big windfall for investors.
"Defending Android"
You’ll notice a common phrase amongst all the Android partners that have weighed in on the Google Motorola purchase so far.
Do they like that Google is buying a competitor? Of course not, why would they? BUT, they clearly realize this was one of the only ways for Google to offer Android patent protection.
That’s what every single statement is about. It has nothing to do with Google “supercharging” Android. Just “defending” it.
Waiting On The Android Nexus RAZR
My three initial thoughts on this deal:
1) This shows just how much trouble Google was in with regard to the patent situation. A few weeks ago, they indicated it was wary of spending north of $4 billion on patents. Now they’re spending north of $12 billion.
Make no mistake, that’s the root of this.
And they had to do something wild like this. No matter what your take is on the patent situation, there’s no denying that Android was in serious trouble.
2) All we’re going to hear over the next several months is how committed Google is to keeping Android as an “open” ecosystem with robust partnerships. But actions speak louder than words. Some partners are saying the right things now, but what else are they going to say? “Fuck the platform that we’re now dependent on.”? This is going to be a very tough sell in the long run.
That doesn’t benefit Apple for obvious reasons, but that could benefit someone like Microsoft in the space.
3) This will either go down as the smartest thing Google has ever done, or the dumbest. There is no room for in between when you’re spending $12.5 billion and disrupting a market you control.
