14 DAY TRIAL // The news that Google bought mobile phone maker, among other things, Motorola is making the rounds and is one of the biggest things to happen this summer in the mobile and tech space. There are a lot of ways of looking at this and many paths Google could take moving forward.
The reason why Google bought Motorola is also complex and the implications are both broad and subtle. But there is one core reason why Google bought the phone maker, patents.
Simply put, if Google wasn't in such a poor position regarding patents to defend its Android operating system, buying a mobile phone maker which has been losing money and almost doubles Google's number of employees is not something the company would have considered even remotely.
The fact is, Google is in an unenviable position when it comes to Android. It may have the biggest chunk of the smartphone market, but competitors are lining up to take a shot at Android, via patent litigation.
Google now has as many patents as Microsoft
Google has less than 2,000 patents, across the company, 1,000 of which it acquired from IBM very recently. Apple has more than 10,000, Microsoft more than 20,000 and that's not counting the 6,000 or so they're getting from the Nortel patent deal, which Google lost.
With Motorola, Google gets its hands on some 17,000 patents, many in the mobile space, and several thousands of applications that could be granted. In terms of numbers, it puts Google at an even footing with its main competitors.
Google needed a lot of patents and fast, to defend Android
Considering that both Apple and Microsoft have been suing Android partners over patents, Google needed to be able to combat the threat and needed to do it fast.
Quite possibly, there was no faster or cheaper way of acquiring this many relevant patents to defend itself. However, there are a few big caveats with this as well.
The deal is not the end of Google's troubles and it comes with plenty of new problems
On the one hand, Google could have simply struck a deal to buy the patent portfolio, or a big portion of it, without actually buying the company.
Granted, this would have meant many billions of dollars for Google, the Nortel patent portfolio ended up being sold for $4.5 billion, which Google believed was too much.
Instead, Google had to dig deeper into its pockets and buy Motorola as a whole, at a 60 percent premium over its stock market worth. It's now stuck with a low-margin hardware business, which has been losing money recently, and 19,000 new employees, this while Google is trying to slim down.
Still, it could work, with some focus and work, Google wants to keep Motorola independent, the phone maker could make a string of Android phones and tablets that prove successful and profitable, bolstering Android as a platform and Google's bottom line.
But Google didn't buy Motorola for the phones or the business, it bought it for its patents. However, it may not have such a great deal in this respect either. While Motorola's patents are many, they're not that 'powerful' in court.
Many Motorola patents are crucial to the mobile phone industry and, as such, are required to be distributed under what are called "fair, reasonable, and non-discriminatory terms." This makes them less potent both as an offensive or a defensive weapon.
This is why Motorola is already being sued by both Microsoft and Apple. Google may be on a much more solid footing than before, weak patents are better than no patents, but the move clearly doesn't end Android's troubles.
It's not a great deal for Google, but it was the only thing the company could do
Why then would Google make such a move, one that puts it in charge of a troubled phone maker, and one that doesn't grant it much bargaining power in the patents war?
Quite simply, Google didn't really have much of a choice, it was in a very poor positioned and it had to do something to back up Android before it was too late.
Especially after losing the Nortel bid, this was the best big deal it could find. It's probably not the last though, Google may still be looking to buy some patents, though it's not going to spend this much in one fell swoop, most likely.