Google + Motorola Mobile: The Beginning or Beginning of the End

Rob Enderle

One of the things you look for in an experienced chief executive is a wealth of knowledge and the ability to use the right tool for the right job. This latest acquisition of Motorola Mobile by Google likely showcases inexperience more than anything else. Let me explain.


Problem to Be Solved


The apparent problem to be solved was the lack of intellectual property held by Google in order to hold off a variety of illegal copy litigation. The latest bad news from this litigation was the ruling that blocked the Samsung Galaxy Tab from much of Europe. A ruling that was expected to spread to other Android tablets shortly. Google had missed the Novell patents, hadn't taken the Nortel patents seriously and for a while it seemed its strategy was to fail and then whine about it. However, it subsequently bought 1,000 patents from IBM and it looked like it was finally taking the threat seriously.


In short, Google needed more patents it could use to defend its platform offerings - Android and Chrome OS - and it didn't need to get into the hardware business.


BMC's Example


You may recall that I covered the BMC-NEON acquisition a few weeks ago. Here, rather than buying the entire company, BMC just bought the technology it wanted and left the rest of NEON alone. It was also able to recruit the employees from NEON that would provide the additional value it wanted and the company avoided a costly merger and subsequent layoff that would have otherwise resulted. BMC showcased that you don't have to buy the entire company, you only have to buy the parts you want, and this approach has far less risk and might actually be worth more because it addresses all of the problem and has none of the typical merger issues.


But Google missed that meeting and instead bought all of Motorola.


Outcome


Buying a company and then shutting it down and laying off most all of its people can be done and Oracle with PeopleSoft set the standard here. But this was to eliminate a competitor and Motorola is a licensee of Android. Shutting the firm down would be counter-strategic. So now it has to run the company. Granted, it may try to run it as a wholly owned subsidiary first, but it still places Google in direct competition with its licensees and that has never ended well. While Google appears to be initially promising to run the firm as a separate property, there are too many conflicts of interest and even if Google does what it promises, it is likely that its other licensees will still feel disadvantaged if Motorola has a hit, or Google will be forced to integrate Motorola if it continues to fail. It is not healthy at the moment and Google doesn't have a turnaround skill set.



Recall that this was one of the major problems with IBM and OS/2. Apple tried this as well, which almost put that company out of business. Granted, like IBM did, Google has a secure primary source of income so it is unlikely this will cause it to fail. However, is should force its licensees to consider other partners to avoid the strategic disadvantage of having to compete with the firm that develops their platform. When Microsoft made this mistake with the Zune hardware, the Plays for Sure ecosystem vanished within weeks and vendors abandoned it.


This should strengthen both the Windows 8 and Windows Phone platforms as alternatives unless Microsoft moves into hardware as well. This seems unlikely given how unsuccessful the Zune media player and Kin phones were. In short, having made this mistake themselves, it is unlikely Microsoft will make it again.


This should collapse the Android products down to those actually made by Google, making it look more like Apple, but without Apple's marketing skills or long-time hardware experience.


Ugly Merger


This is what we call an "ugly merger" as well. The two firms are in vastly different parts of the technology industry. Google is largely a Web services vendor made up of relatively young employees. Motorola is a legacy company with a more seasoned staff. The old hardware engineers will likely balk at reporting in to young software engineers and I would expect the internal turmoil to mirror what we saw when AOL bought Time Warner. You may recall that didn't end well.

 

So on top of this being counter-strategic to Google's current strengths, this kind of merger has a very high failure rate because the firms are so mismatched. Granted, initially Google is going to try to manage Motorola as a wholly owned subsidiary, but only EMC has been able to do this successfully and not with firms it licenses software to. They were simple investments with top executive oversight, while this is a complex relationship with deep interdependencies - more similar to what IBM did with ROLM and what AT&T did with NCR (both failed because the parents couldn't maintain hands off and didn't know what they were doing).


Wrapping Up


While nothing is certain, Google has a history of learning by experience and this experience is likely to be an expensive one. It appears to repeat mistakes made by a variety of companies to substantially overshoot what it needs to accomplish. In the end, the biggest beneficiaries are likely Apple and Microsoft, which will both move to make the acquisition as painful to Google as possible. Microsoft will also likely target Google's OEMs because they will be worried about the unfair advantage Motorola will be getting. Google should swap its "do no evil" mantra for one that is more appropriate: "Those that fail to learn from history are cursed to repeat it."


So while this clearly won't be the end of Google, it likely means the end of Android as we know it. I sincerely doubt another Apple will emerge.



Add Comment      Leave a comment on this blog post
Aug 17, 2011 1:30 AM a. asdf a. asdf  says:

"Google had missed the Novell patents"

No, they didn't miss it, they refused to join the co-bid.

http://techcrunch.com/2011/08/04/the-greatest-trick-microsoft-never-pulled/

Google had to do something, as Android is fast becoming more expensive to license than Windows Phone 7, as Microsoft, Oracle and Apple are all requesting patent royalties. Now Google has some leverage against these lawsuits.

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Aug 17, 2011 2:01 AM Rob Enderle Rob Enderle  says: in response to a. asdf

You are mixing up NORTEL which is what link is about and Novell, they missed Novell, they chose not to participate in NORTEL. 

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Aug 17, 2011 3:05 AM a. asdf a. asdf  says: in response to Rob Enderle

Hmm, the link looks like it mainly talks about the Microsoft Novell "trick" and why Google stayed out;  ____"So what Drummond is saying is that Microsoft's offer to team up with Google to buy the Novell patents was more or less a trick. By teaming up on the Novell patents, Google would have them, but they wouldn't have been able to have been used to protect Android, because Microsoft would have had them too."

Anyway, what do you think the odds are of Google keeping the patents and selling the rest of the acquisition to someone else?

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Aug 17, 2011 3:12 AM Rob Enderle Rob Enderle  says: in response to a. asdf

That's what they should do.   However it is very difficult for a company to make a purchase like this and not feel they should keep it.  Google has a history of repeating the mistakes of others suggesting they won't do the smart thing here either.  

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Aug 17, 2011 3:18 AM Rob Enderle Rob Enderle  says: in response to a. asdf

By the way, you are correct on the piece.   Problem with doing this stuff at a meeting.    But what I meant on saying they missed the Novell patents is that they didn't even bid for them.  On the Nortel patents they at least bid, though they played to lose (bidding PI etc.) 

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