Google and Motorola, a Match Made in Heaven

Earlier this morning, Google announced its boldest acquisition to date by buying up US smartphone company Motorola Mobility. In a bid surely to compete against Apple’s dominance in producing devices with a streamlined software and hardware integration, Google’s $12.5 million (in cold, hard, cash, might I add?) acquisition is sure to shake things up in the smartphone world.

Google’s purchase will not only affect Apple, it’s biggest competitor in the smartphone world, but also manufacturers such as HTC, Nokia, and Samsung along with software developers such as Microsoft and HP. Its effects will revolve around the ability for Google to implement Android OS to Motorola devices and its ability to leverage the portfolio of patents it accrues from Motorola.

Android Does.

Android currently commands just under 50% of the smartphone market share. Its success lies in the fact that the operating system is open for use for all device makers that are willing to conform to a relatively loose set of standards. However, given the fact that Android is much more saturated than iOS (Android is available to every major US carrier, while iOS is currently only available to AT&T and Verizon), Google has recently begun to lose market share to Apple.

Google’s acquisition of Motorola is an attempt to regain its momentum, ironically through borrowing Apple’s tactic of vertical integration. Although Google has collaborated with companies such as HTC to build devices that “just work” with Android (such as the Nexus S), it has yet to build a device which rivals the user experience offered by Apple’s iPhone.

Google is hoping to learn from its mistakes with HTC. Since 2008, Motorola has exclusively focused on building Android OS devices. With devices such as the Motorola Droid becoming wildly popular, Motorola is a seasoned professional in creating sleek and functional devices on the Android OS, and the opportunities for creating a flagship Android device with Motorola are exciting.

In addition to the smartphone market, Motorola is also a market leader in the consumer electronics industry. Already integrating Android 3.x with its Motorola Xoom tablet, Google hopes to expand its OS into the consumer’s living room and beyond. Down the road, Motorola’s in-home presence can be used to be a legitimate competitor to TiVo and Apple TV, allowing for further expansion of the Android OS.

In Google’s press release, CEO Larry Page affirmed that, “This acquisition will not change our commitment to run Android as an open platform. Motorola will remain a licensee of Android and Android will remain open. We will run Motorola as a separate business. Many hardware partners have contributed to Android’s success and we look forward to continuing to work with all of them to deliver outstanding user experiences.” Furthermore, the deal will “supercharge the entire Android ecosystem for the benefit of consumers, partners and developers”.

Patent Wars

Partners of Andriod have welcomed this deal, which demonstrated Google’s full commitment to Android OS as a long-term investment. A positive externality of the Motorola acquisition is the blanket effect of Google acquiring Motorola’s deep portfolio of patents. With over 17,500 patents and 7,500 patents pending, other Android makers can breath a sigh of relief against future patent battles against companies such as Apple.

A recent blog post by Larry Page outlined the issues Google was facing against what he deemed as “anti-competitive campaigns” from competitors such as Apple and Microsoft.

“They’re doing this by banding together to acquire Novell’s old patents (the “CPTN” group including Microsoft and Apple) and Nortel’s old patents (the “Rockstar” group including Microsoft and Apple), to make sure Google didn’t get them; seeking $15 licensing fees for every Android device; attempting to make it more expensive for phone manufacturers to license Android (which we provide free of charge) than Windows Phone 7; and even suing Barnes & Noble, HTC, Motorola, and Samsung. Patents were meant to encourage innovation, but lately they are being used as a weapon to stop it.”

Although Google may just be fanning the flame with its acquisition of Motorola, it has indeed bolstered the arrows in its quiver of portfolios. With an already robust list of partners, Google will be in a unique position to leverage its vertical and horizontal production lines against other smartphone operating systems. Google will be able to compete with Apple and BlackBerry with its own line of smartphones and Windows Phone by continuing to license its proprietary operating system to hardware makers. Given recent patent lawsuits over similarities between iOS/Android devices, this deal should bolster Google’s ammunition in future quarrels.

For consumers, a prevalent Android OS is a welcoming addition to Apple’s highly-controlled iOS, BlackBerry’s business-centric BlackBerry OS, and Microsoft’s infantile Windows Phone. Android provides a highly customizable, open-source option which can be segmented to different consumers. With a flagship device in the making, Android can now capture a market share previously dominated by Apple.