Could Google's Motorola Buy To Fend Off Microsoft… Actually Drive More Business To Microsoft?

from the the-perverted-economics-of-patents dept

It’s pretty clearly established at this point that Google bought Motorola Mobility in large part because of the patents. The number being tossed out is that 50% of the price was for the patents. A big part of the reason for those patents was to fend off Microsoft, who has been quite aggressive in claiming patents over things in Android. In fact, multiple sources have reported that thanks to patents and licensing, Microsoft actually makes more money from Android than from Windows Phone. Talk about perverted patent economics.

Of course, the big question that many raised when Google did this deal was whether it would actually push some handset makers away from Android, out of a fear of competing with their own supplier. While big Android players like HTC quickly downplayed that risk, insisting that they were committed to Android, at least some are speaking out about being less willing to bet on Android, and how it might even drive them to look more closely at Microsoft’s Windows Phone operating system.

Let’s unpack this for a second, because it begins to show just how ridiculous this overall situation is:

  • Microsoft, thanks to patents, makes more money from Android phones.
  • In order to fend off patent threats, Google buys Motorola to get its patents.
  • In doing so, handset makers scared of competing with Google, start looking at Microsoft as a partner.
  • The end result: Microsoft may get more handset partners, but less money, since Android is a pure licensing profit center.

So, the Google buy may result in fewer Android devices and more Windows phones… but less money for Microsoft. Whatever happened to the simple system where companies just compete in the market place and the best one wins?

Filed Under: , ,
Companies: google, microsoft, motorola

Rate this comment as insightful
Rate this comment as funny
You have rated this comment as insightful
You have rated this comment as funny
Flag this comment as abusive/trolling/spam
You have flagged this comment
The first word has already been claimed
The last word has already been claimed
Insightful Lightbulb icon Funny Laughing icon Abusive/trolling/spam Flag icon Insightful badge Lightbulb icon Funny badge Laughing icon Comments icon

Comments on “Could Google's Motorola Buy To Fend Off Microsoft… Actually Drive More Business To Microsoft?”

Subscribe: RSS Leave a comment
Daniel (profile) says:

Re: Re:

Was just about to say almost the exact same thing. The handset makers that go to Windows Phone will likely end up taking a bigger hit than if Google was to use Motorola to promote their own devices with Android and they kept using Android. I don’t have a problem with Windows, XP and 7 were both pretty solid OSs, but Windows Phone 7 just isn’t for me… and numbers seem to show that applies to quite a few people.

Not to mention that the more devices with Android means more people using Google. Why would Google shoot themselves in the foot by limiting it to only their devices? Motorola will probably be no different than it is now, although hopefully sans MotoBlur.

Anonymous Coward says:

I think Google is more likely afraid of Apple more than Microsoft even with the current Microsoft/Motorola lawsuits going on. Microsoft is far more willing to license its patents than Apple, even though that’s relative. From what I’ve picked up Apple has a plethora of super-broad patents that cover handsets.

A Guy says:

If it becomes too big a liability for Google, it can always spin off motorola’s phone division and keep control of the current and future patents with a cross licensing agreement.

It really comes down to “does Google value motorola’s phone R&D division more than it values the goodwill of phone manufacturers?”

The real winner here is HP, if it can execute. Phone manufacturers are wary of Google because of Motorola and Microsoft because of their cozy agreement with Nokia. This seems like a perfect opportunity for HP to execute on its WebOS IP, after it finishes divesting itself of course.

Anonymous Coward says:

Not worried-- Microsoft will probably get EU oversight.

Well, I wouldn’t be surprised if as a result of the NOKIA/Microsoft tie-up, Microsoft is um… uh… gets some good ol’ fashioned European oversight in the next few years.

Cause here’s the thing- the main company with exports in Finland is Nokia, and unless Microsoft creates jobs in Finland for the positions it probably will send to India, it’s possible that Finland and the EU will take care of Microsoft for Google instead.

So I hope Microsoft likes the merger, because hiring the most educated workforce in the world will definitely cost money one way or another.

On the plus side, maybe Microsoft will hire some Finns like Linus Torvolds and consider Windows 9 development in Finland. Once it’s finished, it will be the best operating system ever!

BuzzCoastin (profile) says:

Google's bigger plan

Most people tend to overlook Google’s primary business, which is putting internet advertising in front of as many eyeballs as possible. This why ANDROID is free; it puts more eyeballs on the internet. So will cheap or free handsets and/or tablets.

Operating systems and handsets are merely the platform to mount eyeballs on the WEB page. Don’t be surprised when Google starts offering inexpensive or internet connecting deceives with cheap or free airborne bandwidth sometime around 2013.

Microsoft/Nokia are too last century; too steeped in dieing business models; likewise Apple, which is still an integrated systems company.

TriZz (profile) says:

Re: Re: Re:3 Google's bigger plan

There will be an initial impact…but what do you think is going to happen in a few weeks when they announce the iPhone 5? This was a strategic move by Apple…this is absolutely THE BEST time for him to step down without lasting impact to Apple’s value. Not only is the iPhone 5 coming out…but it’s also going to Sprint (probably). So, now you’ve got 52 million more eligible customers in the US alone.

…plus all the ‘back-to-school’ products being sold…yeah, this isn’t going to last past their next quarterly shareholders meeting.

Tomorrow there will be a good dip in their stock, but once they make that announcement…they’ll easily be the most valuable company…


But it doesn’t make it any less true.

Bill Surowiecki (profile) says:

Re: Google's bigger plan

I have been stating this very idea since Google stepped on the wireless carriers toes in the 700MHz auction.

If Google can entrench itself in the mobile sector and they are almost there, then we are going to see a massive shake up in the industry when WhiteSpace connections and devices finally make it to market.

Derek Kerton (profile) says:

Re: Re: Re: .Google's bigger plan

You guys are stoned. And just two more in a long line of “Google will kill cellular” voices. In fact, I can hear the echoes of you guys in the 700MHz auction: “Google will win and put up free networks.” To which I would write “Google is bidding to trigger the ‘open requirements’ and has no interest, nor any core competency, in running a network.” During the Muni WiFi rush, you guys would say “Google will blanket the US with WiFi and is gonna kill cellular.” To which I would write, “Wi-Fi does not have adequate range, nor protected spectrum to compete with cellular on a wide-area scale.” So, you’re still around.

Now, one thing in your favor. If you keep saying it, someday you may be right. I mean, over time, things do tend to change. And I do thing Google is a good company. But for now, you’re still wrong.

Google makes pennies on each ad display. Phone bills are $40 – $100/mo. Current devices cost $500. There is a massive disconnect between the revenues and the costs of offering ad-based free cellular service.

Lemme help you out: Let’s take Moore’s law and say that those phones will cost just $80 by 2015, and the cellular bills will be down to $15/mo. OK, then, that’s still too much money for Google to offer it on a ad-subsidized business model.

Why do you think Google can’t do customer service well? Because that requires humans, and costs money at a measurable scale. This is one of the problems they found with the Nexus One. Pesky customers expected them to support their product, and that was not cost-effective.

The thing about running a business that earns monies in pennies is that, it truly can add up! However, it means you need to do everything at a massive scale. Huge volumes. And that means, your costs have to remain trivial, or they too will scale out of control.

Bill Surowiecki says:

Re: Re: Re:2 .Google's bigger plan


Thanks for making an assumption as to what I think will happen moving forward.

One of the reason I recall the 700Mhz auction is because it was one of the biggest “fuck you guys” moments in recent business history. I knew Google was not going to win the auction, I never claimed they would. It does not change the fact that what they did do with there bid will eventually lead to a shake up.

Past there you seem to actual have little knowledge of how whitespace technology works as its NOT WIFI! Here is a simple quote on the newly ratified IEEE 808.22 standard.

“The Institute of Electrical and Electronics Engineers (IEEE) has published the 802.22 standard for Wireless Regional Area Networks (WRANs). The standard covers broadband wireless access at up to 22-Mbps per channel over distances up to 100 kilometers from a transmitter without interfering with terrestrial television broadcasts that use the same part of the spectrum.” Thats a 62 mile range incase your math is poor.

Just so you dont make yourself sound foolish moving forward you should probably use the term WRAN instead of WIFI.

Now I also never claimed that its going to kill the current wireless carriers did I? What it is going to do and what I did say is that it is going to shake up the industry. Its going to be hard for a wireless carrier such as Verizon or Att to charge a what they do now for service when your city has an easy and efficient method of providing service. Since the current business model of the providers is betting on DATA more then ever, that statement is even more relevant.

Even better are the discussions about the Router itself, as its claimed that these devices supporting the 802.22 standard will be small enough and energy efficient enough for small start-ups to roll their own service or individuals to offer up their bandwidth free of charge. There are discussions going on right now on the tech for how these devices will jump from point to point without loosing the signal, similar to how your cellphone currently works.

Where Google comes into play is strictly the device itself and the foundation that it has built in the current market. What I am saying is that Google knew this would eventually come if they made the bid in the 700mhz auction and so they did. After that it was a matter of getting all their ducks in a row on the bandwidth thats most similar to how WRAN’s will work. Google is in the business of getting eyes on the internet.

As to your irrelevant comments about device costs and bla bla bla… Well the tech in todays highend devices will be quite cheap by the time WRAN saturation hits.

Thanks for playing “Im a smartass”, better luck next time.

Anonymous Coward says:

Let me get this straight...

Not only do patents encourage companies to become non-practicing entities instead of productive tech companies, it actually gives them incentive to encourage their direct competitor to take all the business because that’s more profitable in the short term. Of course in the long run this could lead to both competitors killing each others’ golden goose, but who cares about next quarter when there’s profits to be had now.

Lawrence D'Oliveiro says:

I Can Think Of 3 Likely Scenarios ...

1) Google uses the patents as a legal weapon, while also trying to prop up MM?s phone business as a going concern. The patent weapon works, the phone business continues going downhill and losing money, while still being enough of a bogeyman to scare the successful Android device makers away from Android.

Result: Android loses.

2) Google uses the patents as a legal weapon, while also trying to prop up MM?s phone business as a going concern. The patent weapon works, the phone business continues going downhill and losing money, without being enough of a bogeyman to scare away the successful Android device makers away from Android.

Result: Android wins.

3) Google uses the patents as a legal weapon, but abandons MM?s phone business. The successful Android device makers keep on selling successful Android devices, free of patent attacks because of the threat of counterattack from Google.

Result: Android wins.

What do you think?

out_of_the_blue says:

You put too much emphasis here on patents.

My opinion is that Google actually wants to make phones. (Since seems you have only opinion to go on, as in the linked piece too, I’ll stick with MY opinion.) I expect that Google will continue to offer Android on same basis. Google’s main revenue comes from /advertising/; they aren’t limited by the practical considerations that mere manufacturers are. — You’re actually thinking in old, set ways, Mike. But anti-trust no longer exists, freeing Google to combine advertising and manufacturing WHILE still giving away FREE OS to control the whole phone market.

BY THE WAY, doesn’t this move by Google, at least from your current view, undermine your notions about a business relying on “free” products from another? It can be withdrawn at any time, incidentally to larger goals of the supplier. A company that hooks you on “free” can’t really be trusted, because /isn’t dependent/ on your input of money!

Another point against the patent emphasis is that would protect them only for /future/ suits, so a complete unknown benefit, not least because how would they measure the suits that aren’t filed? — But I’m not ruling the patent angle out, because, again, Google has tons of /FREE money from advertising/ lying around, aren’t bound by the usual considerations.

I can’t resist also noting:
“Whatever happened to the simple system where companies just compete in the market place and the best one wins?”
You seem to have missed the 80’s and 90’s where Microsoft proved that copying someone else’s ideas into mediocre products ruthlessly, unethically, and illegally marketed in absence of gov’t regulation will win, big.

Tim K (profile) says:

I don't buy it.

I don’t think for one second that these manufacturers are actually “considering a move to Windows phone”. Android is exploding and has been for almost 2 years now. Windows Phone? pbbblt. Nothing. All of these companies have the option of building and selling Windows Phones right now, and some of them are doing so….along with Android phones. HTC, Samsung, LG….they are all making money on Android phones. HTC is making record profits on Android phones. Android is the #1 selling mobile OS. Companies are in the business of responding to market demands (or at least that’s how they should operate… RIAA and MPAA members I’m talking to you). It would be ridiculous to think that any of them are going to stop making Android phones or “switch” to Windows phones simply because of the Motorola purchase. As long as people demand and buy Android phones, every single one of them is going to continue making them, and the “costs” of building Android phones (the risk of lawsuit and/or cost of licensing with MS) has just gone down thanks to the patents Google obtained through the sale.

Yes, I am sure they are all concerned about what Google will do with MM and whether MM will get special treatment. And yes, I am sure they are all cautiously looking at their other options should Google give MM unfair market advantages. But, unless and until Google actually does anything to change the Android marketplace for the worse, its ridiculous to think that any of these companies would turn their business away from a proven seller and proven moneymaker, to jump on board the Windows Phone train as it putt-putts along.

In summary:
It is good business for mfg’s to be concerned about what Google does with MM.

It is good business for mfg’s to continue on the successful course they’ve been on, all the while keeping a watchful eye on MM.

It is a good idea for Google to make sure they keep a level playing field so that their partners continue selling phones with the Android OS so they can continue raking in ad revenue.


Anonymous Coward says:

Microsoft has a pretty significant deal with Nokia, while not quite the same as Google buying Motorola, other handset manufacturers will also have to take that into account as well.

Also more Windows phone handsets could mean more money for Google as they license their new patents for Microsoft to use, should more handset manufacturers go with that platform.

Bill Surowiecki (profile) says:

Calling shenanigans on this idea

I dont buy this line of crap in the slightest.

First off Google has already stated that it will keep Motorola a separate entity. IE nothing is going to change. Now this may not be completely honest, but the most I can see coming from this, is Google finally giving Motorola a shot at building a Nexus phone. That was bound to happen in the future anyway, as Google has stated that the Nexus platform is not intended to be supplied by any one manufacturer. So the worst that could happen is Google would have a larger say in what hardware and features go into a Motorola based Nexus phone. The worst that could happen with that is Google raises the bar for what defines a flagship Android phone, something that seems to happen at a monthly rate already.

Its possible that Google could sell it at a loss, and make up the difference on the back-end, in much the same way the video game console market works, but I doubt it will happen. I think Google would spot the disdain of this idea from other manufactures from hundreds of miles away. Not to mention that the life span of any given smartphone in the market is much smaller then that of a game console, and so the margins on the back-end returns would be much smaller because of this.

My prediction is that this will change nothing in the Android supply chain. My second prediction is that thousands of flame-bait articles will be written, when Samsung releases new Windows phones, ignoring the fact that Samsung has had every intention of doing, well before the news of the buyout was published.

Im waiting for someone to publish a VALID reason why this would cause manufactures to flee from the largest and fasted growing smartphone platform on earth. Not to mention the obvious fact that even if one did jump-ship, they would quickly be replaced. There a quite a few manufactures in China that are praying for an opening like that.

Almost Anonymous (profile) says:

Re: Calling shenanigans on this idea

“””My prediction is that this will change nothing in the Android supply chain. My second prediction is that thousands of flame-bait articles will be written, when Samsung releases new Windows phones, ignoring the fact that Samsung has had every intention of doing, well before the news of the buyout was published.”””

I agree with you, but you forgot to add “and no one will buy the Windows phones because they were dead in the water about a year ago anyway.” As noted by another poster, does anyone know anyone else that has a Windows phone? In a fairly sizable group of friends, family, and coworkers I don’t know a single person bragging about their Windows phone. And before any pedants point it out, yes, I *do* think I would know, we all like to show off our little toys, don’t we?

Anonymous Coward says:

I think you were doing okay on this one until you got to:

“In doing so, handset makers scared of competing with Google, start looking at Microsoft as a partner.”

Google is likely not to compete directly with other players. I think that Motorola will become pretty much an android phone company, but at the same time Google will continue to roll out Android and it’s updates to partners, and keep them on a level playing field. They have no reason not to, Motorola alone would never put them in a dominant market position.

Remember, Google is all about getting in the middle of as many transactions and as many online visits as possible. Cutting out their Android partners would be a complete failure.

Derek Kerton (profile) says:

Re: I still will not buy it

You’re kidding if you think you understand the mobile phone distribution chain. Except for a few rugged individualists willing to pay the full $500 for their phone, the consumer does NOT decide what is in the marketplace.

The phone carriers are the actual customers of the phone makers. It is what they buy, in volume, and what they choose to market and make available to the customer that gets bought. They subsidize the phones they want you to have.

Granted, this is not absolute. Consumers can revolt, backlash, or pay the full nut. But, sadly, the network operators have a greater influence than the consumer overall.

If you doubt me, ask yourself why you don’t see free over the air TV receivers (cost $5) in every phone. Why Bluetooth took so long to arrive at Verizon, and was crippled when it came. Why tethering functionality is removed from Android phones when customers finally take possession. Why the Palm Pre didn’t sell high numbers.

Bill Surowiecki (profile) says:

Re: Re: I still will not buy it

This is another example of how I think the industry will have a shake up… Although shake up might not be the right term as it will happen somewhat gradually.

“You’re kidding if you think you understand the mobile phone distribution chain. Except for a few rugged individualists willing to pay the full $500 for their phone, the consumer does NOT decide what is in the marketplace.”

As mobile computing devices become more ubiquitous, their prices will fall, you only need to look at the PC industry to see an example of this.

If the devices tumble in price it becomes more reasonable to sell the devices direct to the consumer without the carriers playing the middle man with subsidies.

Your in this field for a living how can you not see this as a legitimate possibility?

Lucke says:

This is news why?

Um, did anybody actually notice the company being discussed? INQ, WTF have they ever made that was successful on any level? Who cares if they move from Android to WP7? Personally, I’ve never seen a single INQ device for sale anywhere, nor have I read any reviews from credible sources.

HTC, Samsung, LG, Sony and Moto (obviously) are not dropping Android.

logo branding says:

When developing a logo for your small business, you will want to ensure that it is powerful enough to make people remember it. It should be clean, clear, and uncluttered. You will want to choose a logo that is simple yet distinct, ensuring that it will capture a customer’s attention with a quick glance. Of course, your logo must be appropriate to your business and work well with your company name. It should communicate to the audience what your business is and what it stands for.

Add Your Comment

Your email address will not be published. Required fields are marked *

Have a Techdirt Account? Sign in now. Want one? Register here

Comment Options:

Make this the or (get credits or sign in to see balance) what's this?

What's this?

Techdirt community members with Techdirt Credits can spotlight a comment as either the "First Word" or "Last Word" on a particular comment thread. Credits can be purchased at the Techdirt Insider Shop »

Follow Techdirt

Techdirt Daily Newsletter

Techdirt Deals
Techdirt Insider Discord
The latest chatter on the Techdirt Insider Discord channel...