Approvals for Google's Motorola Mobility (MMI) Buy ...
... and potential risk attendant for Google (see 2nd article).
>> Google Gets U.S., EU Nod to Buy Motorola Mobility
Diane Bartz and Foo Yun Chee
Reuters
Washington/Brussels
February 14, 2012
U.S. and European regulators approved Google Inc's $12.5 billion purchase of Motorola Mobility Holdings Inc and said they would keep a sharp eye on the web search giant to ensure patents critical to the telecommunications industry would be licensed at fair prices.
It was one of a series of approvals on Monday that underscored the scramble by technology companies to acquire big pools of patents.
The U.S. Justice Department also approved an Apple Inc-led consortium's purchase of a trove of patents from bankrupt Canadian company Nortel Networks Corp and signed off on Apple's purchase of patents formerly owned by Novell Inc.
Google, whose Android software is the top operating system for Internet-enabled smart phones, said in August it would buy phone-maker Motorola for its 17,000 patents and 7,500 patent applications, as it looks to compete with rivals such as Apple and defend itself and Android phone manufacturers in patent litigation.
The acquisition, the largest in Google's history, will also mark the Internet search company's most significant foray into the hardware business - a market in which it has little experience. Some investors have worried that Google's profit margins may suffer as it becomes a hardware maker, although Google has said it intends to run Motorola as a separate business unit.
Regulators in China, Taiwan and Israel have still not signed off on the Google purchase of Motorola.
Google shares finished Monday's regular trading session up 1 percent at $612.20.
Antitrust enforcers on both sides of the Atlantic want to prevent companies from gouging rivals when they license patents essential to ensuring different communications devices work together.
"This merger decision should not and will not mean that we are not concerned by the possibility that, once Google is the owner of this portfolio, Google can abuse these patents, linking some patents with its Android devices. This is our worry," EU Competition Commissioner Joaquin Almunia told reporters in Brussels.
The U.S. Justice Department said it was reassured by Apple's and Microsoft's public statements that they would not seek injunctions in filing infringement lawsuits based on the Nortel patents.
"Google's commitments have been less clear," the Justice Department added in a statement. "The division determined that the acquisition of the patents by Google did not substantially lessen competition, but how Google may exercise its patents in the future remains a significant concern."
Almunia said the EU might be obliged to open some cases in the future.
"This is not enough to block the merger, but we will be vigilant," he said.
Regulators in China have until March 20 to decide whether to approve the deal or start a third phase of review, according to a source close to the situation.
The purchase would give Google one of the mobile phone industry's largest patent libraries, as well as hardware manufacturing operations that will allow Google to develop its own line of smart phones.
Google, the newest major entrant to the mobile market, is already being sued for patent infringement by Oracle Corp, which is seeking up to $6 billion.
The legal battles over patents between technology and smartphone companies has prompted the European Commission to open an investigation into legal tactics used by Samsung Electronics Co Ltd against Apple and whether these breach EU antitrust rules.
Some regulatory experts said the DOJ's comments in approving Google's acquisition of Motorola appeared to be more than mere boilerplate.
"They have to proceed with caution and tread lightly," said Shubha Ghosh, a professor at University of Wisconsin Law School who specializes in antitrust law and intellectual property, with regards to Google.
Regulators will be on the lookout for practices that might limit the entry of new smartphones or new technologies.
"If Google makes it more difficult for new technologies to emerge, by locking-in existing licensees of the patents so that it becomes not profitable for them to adopt other technologies, that's the kind of thing that might give rise to antitrust scrutiny down the road," said Ghosh.
Google's move to buy Motorola Mobility came shortly after it tried and failed to buy Nortel's patents. The winner was an Apple-led consortium, which includes Research in Motion Ltd, Microsoft Corp, EMC Corp, Ericsson and Sony Corp, which agreed in July to pay $4.5 billion for 6,000 patents and patent applications.
Google, which runs world's No. 1 Internet search engine, has been under increasing regulatory scrutiny. The U.S. Federal Trade Commission and the European Union are both investigating Google following accusations it uses its clout in the search market to beat rivals as it moves into related businesses. ###
>> Google's Motorola Purchase Approved; Google Becomes Android's Greatest Threat
Ian Fogg
Screen Digest
February 14, 2012
tinyurl.com
• Both the US Department of Justice and the European Commission have decided there are no competitive grounds to block the proposed acquisition of Motorola Mobility by Google.
• Google had agreed to acquire Motorola Mobility for $12.5bn last August, pending regulatory approval.
• Motorola shipped 42 million mobile devices in 2011, of which 18.6 million were smartphones.
• Motorola was the ninth ranked smartphone maker and the number nine phone maker overall in 2011 by unit sales and it has over 17,000 patents.
• Google is the driving force behind Android, the leading smartphone operating system, which is used by Motorola, HTC, Samsung, LG, and Sony for the majority of their smartphones.
Our Take
For Google, the acquisition of Motorola Mobility provides tremendous assets in both the smartphone and set-top businesses. Plus, it brings a patent portfolio that will help Google defend Android against the many intellectual property threats. The competition authorities are right to approve the transaction; Motorola is too small a player to change the dynamics in the mobile market.
Google's Motorola acquisition nevertheless changes the mobile landscape markedly. It increases risk for device makers using Android to power their smartphones. Google already has a dominant role in the product roadmap, software development, media ecosystem and strategy for Android. Google could now choose to favour Motorola either overtly or more quietly. Although Google has stated that is not its current intent such decisions could be undone in an instant.
Google is now in the unusual position of being both Android's greatest supporter and its biggest threat.
Prior to this transaction, Google lacked a hardware business and so did not compete directly with the many handset makers that use Android such as Samsung or HTC. This has changed. Google now follows in the steps of other companies that have both licensed software and also competed with their partners.
The precedents are not positive for Google or the handset makers backing Android. Previous attempts for a single company to both create software for license and also at the same time to ship hardware based on it have failed:
• Nokia licensed the Series 60 version of Symbian while using it for its own smartphones. While Nokia did secure a series of licensees, few shipped more than a one or two device models. Other companies were frustrated by lack being treated as second class partners. Series 60 licensees included Lenovo, LG, Panasonic, Samsung, Siemens, Sendo and Sony Ericsson. Nokia is now winding down Symbian as Nokia has switched to embracing Microsoft's Windows Phone.
• Palm competed with Sony, Handspring, IBM with Palm OS classic. Back before Palm launched WebOS and became a part of HP, Palm attempted to both license its original handheld OS and also ship its own devices. Tensions between the various licensees led Palm to expensively re-organise into two divisions: a software division called PalmSource and a hardware division called PalmOne. The software division failed to survive as an independent concern, and became a part of Access. PalmOne eventually rebranded to be just Palm again.
• Apple licensed Mac OS in the late 1990s. After concerns about the cannibalisation of Apple's own Mac sales by its cheaper partners, new CEO Steve Jobs killed the endeavor.
Perhaps surprisingly to many, Google does license parts of Android, despite the perception that Android is a completely open source platform. In practice the Android ecosystem is not as open a system as Google's marketing suggests, notably:
• Key Android applications are proprietary Google software that device makers must license. The list includes Gmail, Maps, and Android Market. The latter is especially significant: Android Market is the dominant route to market for Android apps and there are few true alternatives outside of North America (where the Amazon App Store is becoming credible) and China (where restricsions on propietary Google services have seen local players flourish).
• Android is developed behind closed doors not in the open. This approach has delayed Google's partners from shipping smartphones based on the latest Android release. While the first Android v4 phone, the Galaxy Nexus, went on sale last November no other v4 Android phones are yet on sale. Android software is only moved into an open source model after it is completed.
• Google's widely heralded Nexus phones and other reference devices are often seen as a Google phone strategy, but they're not the same as the Motorola acquisition. Such flagship Nexus devices were not competitive with Google's partners as they were always developed in partnership with one of Google's device partners. HTC, Motorola and Samsung have each co-developed two of the Android reference devices.
For years, Android backers have split into two camps. Those, like Motorola, that embraced Android to the exclusion of all else, and those like HTC or Samsung that have spread their bets on more than one smartphone OS. Google's Motorola move will persuade more Android backers to look for alternatives. If Google is not incredibly careful, this will dampen the onward march of Android in the smartphone market.
Google's advantage is that there are few credible smartphone alternatives currently available. Windows Phone has yet to gain any market traction. Samsung's bada and RIM's BlackBerry 7 OS are proprietary and are less capable platforms. Symbian is dying. WebOS devices failed to sell and the OS now has an uncertain future as it transitions to an open source business model. Other hoped for smartphone platforms such as MeeGo-successor Tizen or BlackBerry 10 are yet to launch.
The numerous Android smartphone-makers will likely swallow their fear for now and accept Google's clearly stated assurances that Motorola will be run as an independent entity without special treatment. It would be foolhardy not to consider alternatives. Google CEO Larry Page has re-directed its strategy over the last year to focus on the creation of a "single beautiful product" that ties to a single Google identity and runs across a range of devices.
Given this core strategic shift for Google to combine its diverse products into an integrated whole, backed by a newly-unified privacy policy, it's unlikely that Google's new Motorola subsidiary will be left alone for long. And, even if Google has a genuine intention to leave Motorola "as is", a management team's intent may change very very quickly. Google certainly has the capability to make Motorola the first among so-called equals. Phone makers are right to seek out alternatives to Android to hedge against future risks with Android. ##
- Eric - |
