I'm not sure how HP's acquisition of Palm is working out, but I'm sure the boardrooms of competitors and affected companies are discussing strategy.
Google to Acquire Motorola Mobility: 10 Key Takeaways
By Sean Udall Aug 15, 2011 11:15 am
This deal should further tighten the Android ecosystem and help to reduce Android fragmentation.
I've previously talked about the hidden/untapped value in Motorola Mobility ( MMI) when I added the stock back a couple months or so ago. I'll have quite a few more thoughts and trading ideas coming related to this deal but in short I think it has a few key implications both near term and longer term.
In no particular order, here are the 10 key takeaways on this deal:
1. The first is that I do believe GOOG will rise on this deal and rise meaningfully. I'm seeing GOOG selling down on this and I think this reaction makes no sense, but the initial move from the market now on many key events (and news) tends to be a machine-driven swoosh lower as the stops placed recently and closest to the current print simply get taken out. I'll be adding more GOOG on any significant weakness as this strengthens multiple theses I have on the name and widens the GOOG moat further.
2. Yes, part of reasoning here was to protect Android against further and endless patent attacks. But in time this will end up being a huge boost to the Chrome OS platform. More on this later.
3. GOOG did not overpay for this deal and this is a far better use of cash than paying $4.5 billion or more for the aged NT portfolio. In fact, I think GOOG's initial stalking-horse bid of roughly $900 million was appropriate for that portfolio.
4. This raises the value of Research in Motion ( RIMM). Some may think this further hurts RIMM, and in some ways this deal does. However, this highlights RIMM's patent portfolio and network, which have strong intrinsic value. Also, this puts more pressure on RIMM to commit deeper to the Android platform. What RIMM needs to do to supercharge its stock again, and this will add pressure to make some or all of the moves I've detailed.
5. RIMM also rises on potential M&A. Specifically from Microsoft ( MSFT) or even possibly from an HTC or Samsung. It also limits the number of moves that RIMM can now make.
6. This makes me wonder if GOOG and InterDigital ( IDCC) are/were having a hard time agreeing on an M&A value. I've previously asserted that I thought the value of MMI's patent portfolio was worth substantially more than IDCC's. This deal seems to confirm those two thoughts. Plus GOOG gets a company selling over $12 billion in products with substantial growth potential.
7. This should highlight the value of various other stocks with very strong and undervalued IP. Tessera Technologies ( TSRA), CIENA Corp ( CIEN) and SanDisk ( SNDK) immediately come to mind, but there are many more.
8. I wonder how low IDCC can now trade to. I'd be progressively more interested should it get into the mid $50s or lower again.
9. GOOG is paying just one times sales for MMI. However, it receives a quarter of the purchase price back in MMI's net cash. So really, GOOG is paying $9.5 billion for this deal and now less than 1 times sales.
10. This deal is likely a net neutral for Apple ( AAPL) (near term) as the competitive threat from Android was already well entrenched, though it will make it more difficult for AAPL to prevail in various infringement claims against all Android manufacturers.
Bonus: Unlike what many pundits will proclaim, this deal should further tighten the Android ecosystem and help to reduce Android fragmentation, which has been somewhat of an Achille’s heel for Android.
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