The New Google (GOOG) Makes A Bold Move

By: ispeculatornew
Date posted: 08.17.2011 (5:00 am) | Write a Comment  (0 Comments)

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We’ve discussed a few times how putting Larry Page back in charge at Google was a sign of big things to come. It wasn’t (and still isn’t) clear how things will turn out but the chances of Google remaining passive in all of its wars was slim. If you think about it, Google’s 2 main opponents are Facebook and Apple. As the web becomes more social, Google’s absence from the social web was clearly a danger and has become an obsession for Page. Thus, he put a lot of effort, time and resources into the recent launch of Google+. It’s still unclear how that will end up but what is clear is that the product is as good as Google could have hoped for and at least gives the company a shot at social.

The second big rivalry that Google has is in mobile. As users around the world start connecting in different ways, being a force in rival is critical to Google’s future and thanks to its Android operating system, Google is in great shape. In fact, Android is the top o/s for smartphones and gaining market share every month. There are still threats though:

Handset: Google is competing for control of mobile mainly with Microsoft and Apple. The difference between Google and those 2 had been that they also controlled handsets (Microsoft-Nokia while Apple builds it own). That gives them a huge advantage in the distribution of their products and more control over how the handsets evolve over time in order to to be better integrated with software developments.

Patents: It’s a hot topic in Silicon Valley and in the mobile space these days. Companies are suing each other for infringement of patent use to a degree never seen before. It’s become such a problem that the best way to defend themselves is often to threaten to make counter lawsuits. The only way to do that of course is to own patents and for that reason, companies have been eager to buy them. The recent auction for Nortel’s patents was a huge loss for Google which lost to a consortium led by Apple and Microsoft.

What It Acquired?

By buying Motorola for $12 billion, Google not only made its biggest acquisition ever (almost 4 times bigger than the Doubleclick one) but it became a new player in the handset industry. Google had tried different things without much success but buying Motorola gives Google access to its phones, distribution networks but also Motorola’s huge patent collection. That will serve as a deterrent to companies that are currently coming after Google’s Android.

Did Google pay too much?

Google (GOOG) ended up paying a 63% premium for Motorola, an incredible premium and one that certainly leaves many of us with questions. Could Google have made this purchase by paying significantly less? The word is that there were several bidders for Motorola including Microsoft (MSFT). Avoiding going the hostile route by having the support of Motorola’s management was important and it seems like the price to pay was going to be much higher than what the market had priced for Motorola’s holdings. The big part that seemed to be underpriced was the patents. Because of the announcement, Research in Motion (RIMM) saw a huge jump in its stock price as rumors picked up that it could be bought next.

Bold move

There is no doubt that this move looks like a Larry Page led idea. He was a big part of the decision to buy Android a few years ago and Motorola seems to have been the next logical step. No matter how much money Google does have, a $12 billion acquisition will certainly qualify as a bold move, espeially since it is so far away from Google’s core, software oriented activities. Will the move pay off? It’s difficult to say, especially with so much of it being the patents, that impact will be very difficult to quantify.

Another component that will be interesting to see is how handset companies such as Samsung that currently use Android will react and if they will be tempted to move away from Android now that it directly competes with them through Motorola.

Expanding The Google World

We have discussed the notion of “interface” and how well Apple controls its own. Google had a great grip through its Android software that makes it easier to get user data and have a leader position in short, ad display, applications, etc. Thanks to this acquisition, Google now also has control over at least some of the handsets which will certainly help. Google will have a significant presence in almost all spheres of users.

What Is Next?

I think the only real step missing here is for Google to acquire an ISP (internet service provider) which would make it much easier for Google to connect users, to have a better control over what handset they end up using, getting users connected to faster connections which would enable them to do much more. That is certainly a possibility. Google has placed bids on the past on airwaves and has also been working on projects to provide very fast internet connectivity. It has been providing a free wifi in some areas but also had run a contest to introduce very high speed internet to an American city, that project should be up and running in a few months.

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