August 15th, 2011
11:12 PM GMT
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London (CNN)–Google's $12.5 billion acquisition of Motorola is a huge bet both financially - this being its biggest ever acquisition - and strategically.

Android, the operating system which Google built and developed to bring its money making services such as Search to the mobile phone, dominates the low-to-mid price smart-phone market.

It does this by offering phone makers such as Samsung and HTC powerful software to run on their hardware. With this set-up the phone makers do what they do well - make the phones - while Google provides the software.

By buying Motorola Mobility, a hardware company, they appear to be shifting away from that strategy.

So why do it?

According to analysts and commentators, patents are most likely at the top of the list.

To put that in context: Currently there is something of a patent war happening between technology companies, with significant figures being paid out in settlements when disputes arise.

The technology industry appears to be moving toward a sue or get-sued world, so it is crucial as a main player to have a cupboard full of watertight intellectual property to barter with. Last month, for example, a consortium of six companies including Apple, Microsoft and Blackberry maker Research In Motion paid $4.5 billion for a pile of patents from the bankrupt Nortel Networks, but Google decided to pass on the deal.

Motorola - with one of the longest histories in the mobile communications space - owns one of the best patent portfolios, including intellectual property over 2G and 3G technology. Google, with this deal, will now own those assets.

Even so, $12.5 billion would be a very expensive patent portfolio. It is, of course, not all that Motorola has to offer. The company is a blue chip hardware business, focused on two of the hottest areas in tech: Mobile and internet TV.

TV is ripe to be shifted entirely onto the web. Whichever company is successful in leading the way will chalk up a huge win.

As Larry Page, Google's founder and new CEO noted in his statement; "With the transition to Internet Protocol, we are excited to work together with Motorola to accelerate innovation in this space."

Google will face challenges. There are few companies who can do software and hardware well. Benedict Evans, of Enders Research, follows the sector and says the challenge will be how Page, as Google's leader, will deal with owning Motorola.

"There will be a concern that they'll buy it and run it into the ground because they think that they know better than all the Motorola guys, so there is a major execution concern here," Evans says. "There's going to be a massive culture clash and Google need to be very careful in finding the right balance between innovation and humility."

And so, Google will now look to shake out results from one of the biggest acquisitions in the tech industry's history. This deal will be dissected for days and weeks to come, with more insight into the logic revealed as the industry investigates the details.

One thing today's news does show: Google remains a company comfortable making the bigger bets. And in the technology sector, more than any other, it's critical to move with the times.

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Filed under: BusinessGoogle


soundoff (13 Responses)
  1. json

    a lot.. 1) they now have thousands of patents - remember motorola _invented_ the mobile phone 2) it gives them access to a very strong brand - I for one remember my first clam shell motorola fondly 3) they now have a hardware platform which they can use to crank out products that will directly compete with Apple and Microsoft. This will all be fun to see.

    August 16, 2011 at 1:10 am |
  2. micky blue

    planet google.. in the apple galaxy, just left of the microsoft nebula..

    August 16, 2011 at 5:40 am |
  3. anil

    Now java vs .net plus iphone . good for java/open source guys if google sews up half of mobile app space.

    August 16, 2011 at 8:44 am |
  4. Hitesh

    Just like Apple, Google will have hardware+software in a box to offer to people on the road.. Either new-google-phone will become close-ended like iPhone or Apple will give out OS for free to other hardware manufacturers.. overall.. a good move.. let's hope there is no monopoly from google.

    August 16, 2011 at 9:46 am |
  5. Juron

    The deal will open the gate way for Cloud Computing in a whole new way when considering Google hold on the WEB and now the Wireless telecommunication, New and Innovative companies than are in the Software Cloud process business liek ManageWyse.com that offer both data and video data processing over the Internet will benewfit.

    August 16, 2011 at 12:44 pm |
  6. AD

    There are some fundamental issues with patent ownership which needs to be reformed and is overdue now. Patent ownership should not be transferrable and it should die with change of ownership. HOW CAN SOMEONE OWN INTELLECTUAL PROPERTY WHEN THEY HAD NOTHING TO DO ITS CREATION OR INNOVATION

    August 16, 2011 at 12:55 pm |
  7. Christian Meonada

    What I don't like about the Apple brand is that they sell you more, after you bought something from them, like you can't get the free apps if you don't register with your credit card, they say free but registration cost you and critical infos you give away. iPod is useless if you don't have iTunes, even if you have iPad, you still need a laptop to sync everything... I know there will be iCloud, But I doubt that its free. I used to love this brand, but I think it became impractical because of its limitations. That is why I am excited to see the development of Google, now with Motorola, I hope they provide quality products, innovative and practical solutions, like free apps with no strings attached! I love to see a very big Google bite to that Apple!

    August 16, 2011 at 2:23 pm |
  8. Bedan Kamau

    All I can Say Dr. Tim Wu has engaged us in this discourse already. Nothing new here.. watch http://bcove.me/6h43ymsc (part 1 and part 2). Extremely insightful!

    August 16, 2011 at 3:55 pm |
  9. Anton Hošek

    To Mr Meonada – I see your point, but Google also knows a lot about users of their services – perhaps even more than Apple. Using iTunes to centrally administer programs and content on Apple products has a certain logic – it's a closed system, but one that is a lot less free of the kind of wild-west environment on open platforms. Giving Apple your credit card number is nothing compared to what Google (or yahoo, or MSN via hotmail) can potentially know about you from a privacy concern angle.

    August 16, 2011 at 7:07 pm |
  10. billy

    who is this puta strelaoz ('light' in this rant, same b*tch though)? her s**t is everywhere on the web anywhere there is a symantec article (and other places as well). get_a_life, we're tired of your whining!

    August 19, 2011 at 3:00 pm |
  11. Eric Sorensen

    Thank you for writing the only article on CNN about this subject that doesn't have a pro-Apple slant... Unlike your co-workers in the Tech department at cnn.com USA.

    August 19, 2011 at 8:10 pm |
  12. Dialo Burke

    I know this sounds crazy, but i put this on my mothers grave that this is my idea.I wonder if Google has filters in place that allows for it to track certain keywords and information. This would be great information for investors and getting a leg up on the competition. I have been keeping my ideas on the internet for some time, mainly Google. A couple of my ideas have shown up all over the place and i believe Google has been involved in copyright/intellectual property infringement itself. I started this idea in June and even tried to post it on a yahoo article before Google+ was installed. My idea is time stamped through google and the dates can be obtained through a court order. https://docs.google.com/present/view?id=dhwgpq3_26hpbppbcv&interval=10.

    August 29, 2011 at 3:33 am |
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