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In what looks like an attempt to help guard against a legal patent assault by its large tech rivals, Google is spending $12.5 billion to buy mobile handset maker Motorola Mobility.
The Motorola Droid family of smartphones on Verizon Wireless helped Motorola Mobility stage its comeback.
(Credit:Motorola)
In the wee hours of Monday morning, Google dropped a bombshell on the technology industry with its announcement that it will buy mobile handset maker Motorola for $40 a share, a 63 percent premium over the closing price of Motorola Mobility on Monday.
For Google the move takes the search giant away from its core competency of developing software into a new realm of becoming a hardware maker. Motorola, which has been in existence for 80 years, is one of the oldest mobile phone makers on the market. In fact, it developed the first commercial cell phone.
With Motorola's long history in mobile comes an enviable treasure trove of intellectual property that could helpAndroid fight a mounting patent assault from the biggest names in technology.
In his explanation of the deal, Google's CEO Larry Page mentioned in his blog post that Motorola's strong patent holdings were a major consideration in the deal.
"We recently explained how companies including Microsoft and Apple are banding together in anti-competitive patent attacks on Android. The U.S. Department of Justice had to intervene in the results of one recent patent auction to "protect competition and innovation in the open source software community" and it is currently looking into the results of the Nortel auction. Our acquisition of Motorola will increase competition by strengthening Google's patent portfolio, which will enable us to better protect Android from anti-competitive threats from Microsoft, Apple and other companies."
Since the Android operating system was first developed, Google's strategy has been to develop an open source software available to any hardware maker for free. The idea was to compete against Apple's closed iOS platform by allowing hardware makers, such as Motorola, Samsung, and HTC to leave much of the software innovation to Google, while they could focus on innovating around hardware. Meanwhile it could also battle against Microsoft, which asks its licensees to pay a fee for using its software.
Android's strategy has reaped rewards. In just three years the Android platform has emerged as the leading mobile operating system for smartphones. Google, which is working with 39 phone manufactures and 231 carriers around the world, says that more than 550,000 Android devices are activated every day.
But Android's success has drawn the ire of competitors, particularly Microsoft and Apple, which offer their own competing mobile platforms. Oracle, which recently acquired a patent portfolio from Sun Microsystems, has also waged a patent war against Google.
Oracle is using the Java patent portfolio it acquired from Sun to go after Android. Meanwhile, bitter enemies Apple and Microsoft have teamed up to buy patents from Novell and bankrupt Nortel Networks. The goal of these groups acquiring the patents is to force Google to pay $15 licensing fee for every Android device, thus making it more expensive for handset makers to use the Android platform and perhaps slowing Android's growth, Google says. Patent holders have also targeted companies that are already using the Android software, including Barnes & Noble, HTC, Motorola and Samsung.
"A smartphone might involve as many as 250,000 (largely questionable) patent claims, and our competitors want to impose a "tax" for these dubious patents that makes Android devices more expensive for consumers," said David Drummond, Google's chief legal officer. "They want to make it harder for manufacturers to sell Android devices. Instead of competing by building new features or devices, they are fighting through litigation."
This is where Motorola comes in. The company has patent portfolio that includes more than 17,000 approved patents. And it has another 7,500 patents filed and pending approval. This portfolio of patents is substantially larger than the group of patents that was sold from Nortel Networks.
Earlier this summer, a consortium of bidders, including Apple, Microsoft, and Research in Motion, bought Nortel's 6,000 patents for $4.5 billion. The hefty price tag paid for these patents caused Motorola to re-examine its own patent portfolio. And it caused activist investor Carl Icahn to push Motorola to look at more ways it could monetize its hefty mobile patent portfolio.
On a call with investors and journalists on Monday morning, Google's legal team would not divulge how Motorola's patents would factor into its legal strategy. But David Drummond, Google's chief legal officer and senior vice president, said he believes the Motorola patents will help protect all Android products.
"We have been saying for a long time that we intend to protect the Android ecosystem from litigation," Drummond said on the call. "While we're not prepared to talk specific strategy, Motorola having that kind of patent portfolio to protect the ecosystem is a good thing."
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The Motorola Droid family of smartphones on Verizon Wireless helped Motorola Mobility stage its comeback. (Credit:Motorola)
In the wee hours of Monday morning, Google dropped a bombshell on the technology industry with its announcement that it will buy mobile handset maker Motorola for $40 a share, a 63 percent premium over the closing price of Motorola Mobility on Monday.
For Google the move takes the search giant away from its core competency of developing software into a new realm of becoming a hardware maker. Motorola, which has been in existence for 80 years, is one of the oldest mobile phone makers on the market. In fact, it developed the first commercial cell phone.
With Motorola's long history in mobile comes an enviable treasure trove of intellectual property that could helpAndroid fight a mounting patent assault from the biggest names in technology.
In his explanation of the deal, Google's CEO Larry Page mentioned in his blog post that Motorola's strong patent holdings were a major consideration in the deal.
"We recently explained how companies including Microsoft and Apple are banding together in anti-competitive patent attacks on Android. The U.S. Department of Justice had to intervene in the results of one recent patent auction to "protect competition and innovation in the open source software community" and it is currently looking into the results of the Nortel auction. Our acquisition of Motorola will increase competition by strengthening Google's patent portfolio, which will enable us to better protect Android from anti-competitive threats from Microsoft, Apple and other companies."
Since the Android operating system was first developed, Google's strategy has been to develop an open source software available to any hardware maker for free. The idea was to compete against Apple's closed iOS platform by allowing hardware makers, such as Motorola, Samsung, and HTC to leave much of the software innovation to Google, while they could focus on innovating around hardware. Meanwhile it could also battle against Microsoft, which asks its licensees to pay a fee for using its software.
Android's strategy has reaped rewards. In just three years the Android platform has emerged as the leading mobile operating system for smartphones. Google, which is working with 39 phone manufactures and 231 carriers around the world, says that more than 550,000 Android devices are activated every day.
But Android's success has drawn the ire of competitors, particularly Microsoft and Apple, which offer their own competing mobile platforms. Oracle, which recently acquired a patent portfolio from Sun Microsystems, has also waged a patent war against Google.
Oracle is using the Java patent portfolio it acquired from Sun to go after Android. Meanwhile, bitter enemies Apple and Microsoft have teamed up to buy patents from Novell and bankrupt Nortel Networks. The goal of these groups acquiring the patents is to force Google to pay $15 licensing fee for every Android device, thus making it more expensive for handset makers to use the Android platform and perhaps slowing Android's growth, Google says. Patent holders have also targeted companies that are already using the Android software, including Barnes & Noble, HTC, Motorola and Samsung.
"A smartphone might involve as many as 250,000 (largely questionable) patent claims, and our competitors want to impose a "tax" for these dubious patents that makes Android devices more expensive for consumers," said David Drummond, Google's chief legal officer. "They want to make it harder for manufacturers to sell Android devices. Instead of competing by building new features or devices, they are fighting through litigation."
This is where Motorola comes in. The company has patent portfolio that includes more than 17,000 approved patents. And it has another 7,500 patents filed and pending approval. This portfolio of patents is substantially larger than the group of patents that was sold from Nortel Networks.
Earlier this summer, a consortium of bidders, including Apple, Microsoft, and Research in Motion, bought Nortel's 6,000 patents for $4.5 billion. The hefty price tag paid for these patents caused Motorola to re-examine its own patent portfolio. And it caused activist investor Carl Icahn to push Motorola to look at more ways it could monetize its hefty mobile patent portfolio.
On a call with investors and journalists on Monday morning, Google's legal team would not divulge how Motorola's patents would factor into its legal strategy. But David Drummond, Google's chief legal officer and senior vice president, said he believes the Motorola patents will help protect all Android products.
"We have been saying for a long time that we intend to protect the Android ecosystem from litigation," Drummond said on the call. "While we're not prepared to talk specific strategy, Motorola having that kind of patent portfolio to protect the ecosystem is a good thing."
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