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News Analysis: How could Google-Motorola Mobility marriage work out

08-16-2011 09:03 BJT

SAN FRANCISCO, Aug. 15 (Xinhua) -- Google Inc. on Monday announced that it has agreed to acquire hardware maker Motorola Mobility Holdings Inc. for about 12.5 billion U.S. dollars. For this software-hardware couple, industry watchers and investors are wondering whether the marriage could work out in the future.

RATIONALE

On a conference call with analysts, Google CEO Larry Page outlined the rationale that could lay the two on a bed of roses.

There is no question that Google is betting on mobility as the future of computing. The purchasing price, 63 percent premium over Motorola's closing price on Friday, somehow shows that Android is a strategic priority to Google with respect to its core business.

"I think they have an exciting product roadmap, a strong vision for the future and are poised for growth," said Page on the conference call.

Motorola's patent portfolio is also seen as a big reason for the acquisition. "Our acquisition of Motorola will increase competition by strengthening Google's patent portfolio, which will enable us to better protect Android from anti-competitive threats from Microsoft, Apple and other companies," Page wrote in Google's official blog.

"We believe we'll be in a very good position to protect the Android ecosystem for all of our partners," said Google's chief legal officer David Drummond during the conference call. But he declined to provide specifics on the company's future legal strategy.

In a recent post on Google's official blog, Drummond accused Microsoft, Apple and other companies of waging hostile patent wars over smartphone technologies.

Integrating a hardware company could help Google to unify Android as Apple's integrated software-hardware model has been proved to be a success. Analysts said fragmentation has so far been Android's biggest drawback with too many different versions by different hardware providers.

Meanwhile, the deal could give support to Google TV, which has been struggling to gain customers and has faced resistance from major networks. Motorola Mobility is the leading player in the cable box business. Through the acquisition, Google will instantly get significant relationships with cable providers and could integrate Android into its set-top boxes.

"I think there's an opportunity to accelerate innovation in the home business by working together with the cable and telco industry as we go through a transition to Internet protocol," Page said on the conference call.

CHALLENGES

However, more questions have already been raised than answers toward the acquisition.

The deal leaves Google in a very awkward position of being half- pregnant and trying to be a provider of an open source " environment" while at the same time competing with its "customers, " said John McCarthy, an analyst from market research firm Forrester.

As Google has been emphasizing on the patent protection it will gain from the deal, reactions from its hardware partners have been unified on Monday.

"The partnership between HTC and Google remains strong and will not be affected by this acquisition," HTC said in a statement.

But McCarthy said Microsoft could pitch Asian manufacturers, including HTC, Samsung and LG Electronic, saying they should increase their support for Windows Mobile as protection against Google favoring its own hardware play.

On Monday's conference call, Page said Google will still build Android as an open-source platform and look forward to continuing its work with all of hardware partners on an equal basis. But he declined to give details about how Motorola will compete with other Android phone makers, such as Samsung or HTC.

There are also concerns that the software-hardware bundle may not work for Google as it did for Apple. Analysts said Google has little experience with hardware manufacturing and sales, such as supply chain, parts and distribution, and Motorola does not do the best job in these areas among competitors.

Motorola currently has 19,000 employees, which means Google will increase its size by 60 percent from 29,000 of its own.

The deal also means there are four integrated hardware-software offerings: Apple/iOS, HP/WebOS, RIM/QNX and now Google/Motorola and could force Microsoft take the final step on the long-rumored takeover of Nokia,noted McCarthy from Forrester.

"The deal extends the overall market fragmentation at a platform level well into 2013 to the frustration of developers," he wrote in a blog post.

Editor:Wang Xiaomei |Source: Xinhua

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