Top 5 Reasons Why Google-Motorola Deal Will Shake up Technology Industry

[1] Marriage of Hardware and Software (Vertical Integration): Top 5 Reasons Why Google-Motorola Deal Will Shake up Technology Industry

Google Android OS may have more market share across devices, but Apple iPhone to date is the single most popular smartphone in the world. Despite the launch of numerous Android-powered smartphones, none have come close to rivaling iPhone's success, leave alone beat it.

Why is iPhone so popular? It is because Apple has mastered the way of seamlessly integrating hardware and software and the results are iPhone, iPad, iPod - devices that have become leaders in their respective market segments.

In this regard, Google has so long failed to catch up with Apple because Google is essentially a software-driven company. However, the acquisition of Motorola changes all that. Thanks to the deal, Google, which now controls the experience from software to hardware, can create Android phones to its exact specifications from ground up and take advantage of the latest advances in the Android OS, just like Apple does.

Another reason Apple has grown to become No.1 technology company because its products not only look better than their rivals but also perform better. The seamless experience offered by Apple products define them as lifestyle products and not just gadgets. It has been made possible because Apple is an expert in marrying art with technology. On the other hand, though Google is an innovator like Apple, the search giant has so far lacked both the expertise as well as the infrastructure to handle the hardware business and it depended on hardware partners like HTC and Samsung to drive its ambitions in the mobile computing industry.

The acquisition of Motorola, however, makes Google the owner of both hardware and software and it could help bridge that gap between Apple and Google. Most importantly, it may help the search giant produce products that marry art and technology.

The acquisition of Motorola also pits the target company as a new threat to Apple. To date, Samsung was probably Apple's only major threat in the mobile space, thanks to its Galaxy range of smartphones and tablets. But suddenly Apple faces a new threat and perhaps a bigger threat in Motorola because now Google will be working more closely with Motorola and there is a good chance consumers will buy more Motorola devices. Simply put, Apple's worries in the mobile space just doubled.


[2] Patent Wars: Top 5 Reasons Why Google-Motorola Deal Will Shake up Technology Industry

The mobile computing industry has become a hotbed for patent disputes and thrust in the patent war, Google looked very vulnerable, armed with only about 1,000-odd patents while its rivals boasted of vaults of patent portfolios. In other words, Google was the only company with a pop-gun at a gunfight.

Not surprisingly, more often than not, Google found itself at the wrong end of patent lawsuits and the biggest blow came when last month rivals Apple, Microsoft and Research in Motion scooped up Nortel patents for $4.5 billion.

At that time, Kent Walker, Google's senior vice president and general counsel, did not hesitate to acknowledge that the "current flood of patent litigation" was hurting Google.

However, Motorola changes the balance of power at once. The acquisition of Motorola gives Google access to more than 17,000 patents (excluding over 7,000 pending patents) held by Motorola, which pioneered the cellphone business. And, by owning a healthy portfolio of patents, Google will now be able to successfully defend itself against a barrage of patent lawsuits filed by Apple, Microsoft and other rivals that want to stomp on the company's Android operating system.

And, Google CEO Larry Page doesn't attempt to hide that fact. "Our acquisition of Motorola will increase competition by strengthening Google's patent portfolio, which will enable us to better protect Android from anticompetitive threats from Microsoft, Apple and other companies," Page said in Monday's conference call.

According to Trip Chowdhry, an analyst with Global Equities Research, armed with the patent portfolio, Google can also help its Android partners such as HTC and Samsung, which are being sued by Apple. "Probably Google can use these patents to indemnify other Android partners against various IP infringements," the analyst wrote in a note to clients on Monday.

Some analysts feel, however, that Motorola's patents won't help Google with the current litigation it faces from Apple and Oracle, but that's another story.

[3] Invasion of Living Room: Top 5 Reasons Why Google-Motorola Deal Will Shake up Technology Industry

Remember the Google TV products that were launched last year amid much fanfare? Well, the products, instead of dazzling, have fizzled, getting lukewarm response from consumers. Both Logitech, which had invested heavily in the OS with its Google TV Revue set-top boxes, and Sony, which was selling Google TV-integrated HDTVs, had to slash the prices of their products to attract customers.

The Google TV user interface that was launched earlier this year in May at the Google I/O was a huge step forward, focusing on simplified search function and Android apps.

Nonetheless, Google TV products have been dwarfed by Apple TVs and Roku and that's not even counting the various TV OS that are out in the market.

Moreover, Google has struggled persuading developers to build TV-specific applications.

However, the market dynamics could change with Motorola under Google's belt. Motorola is a strong player in the set-top box and home devices market and last year, according to Infonetics, Motorola Mobility was the leader in set-top box revenues and also leads in hybrid IP/QAM set-top boxes (the boxes used by operators like Verizon that combine broadcast TV and over-the-top applications).

Leveraging Motorola's expertise in set-top TV boxes, Google can pitch Google TV as the underlying OS and can now make a bid to expand the presence of Google TV products into the living room.

Moreover, with many operators planning to make a transition to cloud-based UI for their set-top boxes, it could be possible that in the near future, they would abandon their proprietary OS and adopt Google TV as the underlying OS, a move that would simplify and accelerate rollout of new applications on cable systems and improve overall UI on the set-top boxes.

"Everybody's focused on the handset side of the (Google-Motorola Mobility) agreement and what it does for Android, but the side issue that hardly anybody's looking at is the implication of what it means for Google TV and the set-top boxes," Gartner analyst Van Baker wrote in a note to clients. "(Smart TV) can push interactive content that's related to the content that you're watching. Manufacturers love this because it extends their ability to engage the consumer above and beyond the engagement they get with an ad."

No wonder, in Monday's conference call, Google CEO Larry Page said that Motorola is a "market leader in home devices and video solutions...We're really excited to work together with them and the industry to really accelerate innovation."

[4] Fragmentation and a Better Android: Top 5 Reasons Why Google-Motorola Deal Will Shake up Technology Industry

The Android market is currently heavily fragmented. There's a different version of Android for tablet (Honeycomb) and smartphone (Gingerbread). This has caused problems to developers, who are being forced to develop applications (apps) for the fragmented Android market.

Google has attempted to solve this problem by introducing Ice Cream Sandwich OS during I/O conference in May. Ice Cream Sandwich has been designed to integrate the smartphone and tablet variants of Android into one and elevate it to the same playing level as iOS, which runs iPhone as well as iPad.

Consequently, the gap between Apple App Store and Android Market Place will also narrow.

However, Ice Cream Sandwich will not be out until later this year.

Till then, Google can release the canonical version of Android in Motorola handset or tablet for developers to target and other handset makers to follow if they want full app compatibility.

For the moment, Google has promised that Android will remain an open OS and that other manufacturers like Samsung LG, HTC or Sony Ericsson need not worry that Motorola will get special treatment. Google has also backed up its promise by saying Motorola Mobility's operations will continue to be independent. Perhaps Google will stick to its promise but there is no doubt that Motorola's Android phones will be, sooner or later, the first among equals and the company will be Google's new flagbearer for the latest and greatest in both hardware and software.

Acquisition of Motorola will also help Google build a better Android OS faster. To date, all Android handset makers have been putting customized UI skin atop the Android OS. Though this has given each Android device a unique look and feel, it has also caused problems because the various handset makers had to coordinate with Google on issuing the updates and the updating process often got delayed.

Moreover, Android users frequently complain that they get the impression that the Android OS is a cheap knock-off of the iPhone OS and it has been hastily cobbled together, leading them to face various problems such as battery life issues, crashing apps (including Google's own), confusing settings, spellchecking weirdness, etc. Google can now tackle this problem as it can directly address the issues and pass on the solutions to its partners.

[5] Diversification and Google Wallet: Top 5 Reasons Why Google-Motorola Deal Will Shake up Technology Industry

Despite being a little over a decade old, Google has remained a one-trick pony, the bulk of whose revenue and profit generates from online search advertising.

There is no doubt that Google’s search engine continues to be the major cash cow but if it is to pose a threat in the mobile computing industry (as is its desire), it needs to grow out of its idyllic, Peter Pan-like existence that is reflected through its college campus-like offices.

In this regard, Motorola will allow Google to grow up because at once Google will now become responsible for over 19,000 Motorola employees that are used to traditional organizational standards.

Motorola also brings Google a new business focus - mobile computing - in addition to at least $12 billion a year in new revenue, including $8 billion in mobile handset business.

Besides helping Google to diversify, Motorola deal will help Google accelerate its initiative in near field communications (NFC) technology - Mobile Wallet.

Till now, Google relied solely on the Sprint Nexus S to carry its Mobile Wallet service but with Motorola under its belt, it won't have to do so anymore.

"This absolutely strengthens Google' position in mobile payments," Nick Holland, senior analyst with Yankee Group, told On Wall Street On Wall Street. "The big issue for mobile payments has been the secure element, the physical hardware that allows someone to own the mobile wallet. By having ownership of Motorola, which makes 10 percent of smart phones in U.S., Google has the potential to put its own secure element in all those devices."