Multiple reports this week have said that Google will get regulatory approval on its intended acquisition of Motorola Mobility as soon as next week.  If this happens as expected, the acquisition should close shortly thereafter.

This isn’t much of a surprise. When the deal was unveiled in mid August, 2011, Google had offered $40 per share. Motorola shares immediately spiked to over $38, reflecting small risk of the deal falling through. 

Stock TalkIn other words, nobody really believed Google would have trouble gaining regulatory approval. And why shouldn’t they get it? If Apple can own an entire platform and gain so much market share in the smartphone world, why shouldn’t Google be able to make its own hardware and aim to control the entire platform from software, to network infrastructure, to hardware?

Google says it wants Motorola’s patents, but also talks up the company’s hardware design capabilities. But I still think Google wants to own the entire platform so that it can solve the fragmentation problem before it gets out of control. 

There really aren’t any mobile OS vendors who don’t have significant stakes in hardware companies. RIM and Apple are the obvious examples, but so is Microsoft, with its quarterly $250 million dollar “platform support payments” to Nokia.

Android isn’t really open. That’s not a knock. It’s just the truth. The whole “open” argument does seem kinda brilliant though. Look how many vendors adopted it. Look how much market share Google now has in the mobile OS market. 

Do they really care about the long term success of the vendors? Maybe, but maybe not. Google cares about people using Google services and showing Google ads. They only need to support vendors until critical mass is achieved. As soon as the OS has critical mass among hardware vendors, app developers and consumers (check, check, and check) it has won. Google can then move onto fix problems such as fragmentation and integration into the larger consumer product ecosystem (home entertainment, etc).

The battle is changing, and Google is adapting along with the market. 

We’ve already seen that 8.5 percent of Internet use comes from mobile devices. That number is nearly double its year-ago level. Where do you think it will be in 2, 3 or 5 years? Probably a lot higher. Google is an advertising company. It’s critical that they position themselves such that user eyeballs are on services or content that Google controls. In my opinion, buying Motorola was a risk worth taking to protect Android’s growth and sustainability.

Chris Umiastowski is a former sell-side equity analyst at Orion Securities and TD Securities. Before that, he was an engineer for Nortel Networks. Chris is co-host of the Mobile Nations Stock Talk podcast.

 

Reader comments

Stock Talk: What Google's really getting out of Motorola

18 Comments

Well thats not right! Google is open and free and this would make them closed and not what people want. This is very bad!

Also are you saying Google mislead us about being open, they really aren't open? All this time and I thought they were the best company standing up for me and being free and open and giving it to the man. Now Google is the man.....OMG

So, according to the author (an "analyst") the main purpose for Google to purchase Moto is to control Android "fragmentation". And Android Central just talked about how fragmentation of Android was only a problem for reviewers (and some developers).

AC had it right in their first fragmentation argument. Android is evolving rapidly, much more rapidly than those other platforms. The choice is between have the choice to do things the way you choose or the way the manufacturer chooses.

If Google were to try to cut out the other manufacturers, they would just push them into MS's camp. Not only that, if they were to do this, they'd lose a LOT of customer and developer confidence in their trustworthiness.

I don't think this guy has it right. I do see them using Moto to encourage the manufacturers to stick with the standard UI, but not to cut them out.

Quote: But I still think Google wants to own the entire platform so that it can solve the fragmentation problem before it gets out of control.

Again, as posted elsewhere on this site, fragmentation only matters to device reviewers.

Google has gotten burned badly by Samsung and Verizon (the tinfoil in me says those two were in secret collusion to force a Nexus failure, but I'll go take my meds now).

I think Google wants to have a clear outlet for game changing phones and technologies without having a carrier and a manufacturer filter their ideas.

This deal is likely to allow for an entire brand eventually being pure android, with any skin being something the user installs after the fact (if they want it). This will by itself put a brake on the skinning of Android by other manufactures, but it won't prevent it.

Google just wants a stick (to go along with the carrot) in its dealings with the Carriers/Manufacturers. Google knows that 700mhz licenses for LTE carry "any device" clauses, and they can sell devices right around the carriers objections.

It might lead to the forking of Android as manufacturers decide they don't want to compete with a Googlrola that is one step ahead of them at every turn. It might actually enhance WinMo's chances of success.

Then again, Google might do as they said, and run the hardware side of Motorola hands off. There, the meds are kicking in already.

Hogwash... if Android weren't open I wouldn't have a custom ROM installed on my phone.

I think you are splitting hairs and applying a very specific definition to "open" that not all would agree with. If you see the world as black and white and without nuance, then you could conclude that Android is not open. But the reality is that there are many degrees of open, and if you're gong to make a statement like that you need to qualify it and say exactly what you mean.

I think their opinion is that Android is now "openy" because of Honeycomb, or that it has always been "openy" because Google releases source code when it is convenient for Google instead of having a truly open development process for Android.

Agreed. It is open enough to do some pretty cool things with if you have the time, knowledge, and ability. One could probably make a pretty sweet Android doorbell if they really wanted to.

I think people confuse Android with the "super-holy-google-features batman" that they get with a store-bought Android device. I have never seen anything that says you can't bake everything with a Google logo out of the source code and compile it towards running on your own hardware. That is what they talk about when they say "open". It may not be full-on Linus open, but it's not bad. Every marketing person out of Google and their partners talks about the Google Android experience (market, apps, cloud, etc.), which is something different than the computer science that drives it, so I see where the confusion comes from.

@Curthibbs I think your definition of "open" is skewed. The only "open" android devices is the Nexus brand. If you have to use a backdoor method to gain root then that is not "open". Just because you run a custom ROM does not mean your device is "open". The source code (AOSP)is available for whom ever chooses to use it. (Example: Nook and Amazon Fire) Your definition of "open" is no different than Jailbreaking an iPhone and installing Cydia. Which Android is getting closer to anyhow, just look at what Koush and the Cyanogenmod team are trying to do with their own market for removed apps from the Android Market.

Root and jailbreaking have very little to do with being open. WebOS has until very recently not been very open at all but you could still root the devices. I also don't see your point with Koush and Cyanogenmod.

His definition obviously pointed to the open source aspect of android. It could be more open, like the various flavors of linux or firefox which allow people to view the the very latest build in development instead of just releasing finished builds but his point still stands. Someone took the source, modified it, and put it on his phone. Something that would be impossible were it not open. There are no custom builds of IOS, WebOS, or BB OS.

The thing I could see as being a problem is that other manufacturers would tire of trying to play catchup with Moto since they would have a key advantage of being the very first to have access to software and android itself could be tuned to work best on these devices. This might be helped if Google did allow companies access to alpha and beta builds of the software at the very same time as Moto, this may be critical to the continued success of Android.

I think the biggest thing Google gets with Motorola is security/protection.

Security & protection against lawsuits by competitors (bolstering patent portfolio), security/protection from manufacturers abandoning the platform as they now own a manufacturer.

"Google is an advertising company" That might have been true before Android and other projects they have,like, self-driving cars in "DARPA" and now getting into home entertainment. Advertising still is their core but to call them only an "advertising" company is not so.

I think Google wants Motorola for exactly the reasons they stated...the patents. The design team and brand power are just gravy.

I also believe that Google will do exactly what they said they'd do in regards to playing favorites with Motorola...they won't.

I'm very much looking forward to buying Motorola phones in the future because I think they have the best build quality, radios, & battery management in the industry.

If this acquisition by Google gets them to start using non-encrypted bootloaders, I will be very a very happy camper!

The piece of the Motorola deal that seems underrated to me is their cable box business. If they can use Moto's relationships with cable providers to get tens of millions of Google TV-equipped cable boxes into homes, they can both lock users into Android, and make huge ad revenue off the boxes.

Wow you bring up a very good point FrasierCrane. I didn't even think of this part of the deal. Motorola has a very good relationship with cable companies and this could certainly put Google TV at the forefront of the industry. I hope this turns out to be true! Then again most cable companies now have their own operating system for their boxes (Mystro Digital Navigator for TWC) and I doubt they would be willing to let Google TV take it over.

There is no more or less open people. Open source mean you can see the code. Can you see Androids source? Open source licences for the most part do not define a development process. They don't say you have to show the code while its in development. Honeycomb was a rather screwed situation but understandable. I bet the KDE folks wished they had done that with 4.0.

But hey don't take my word for it. Ask Amazon if Android is open. Funny how the critics call it open when they think it hurts Google for Amazon to be able to run off with the project like that. So which is it?