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Does Buying Motorola Emerge As A $12.5 Billion Mistake For Google?
The consensus view is that Google bought Motorola Mobility in late 2011 for its patent portfolio. The company spent $12.5 billion, Google’s largest acquisition by far and a major bet by Larry Page.
During the acquisition approval process Google said that it would treat Motorola the same way it treated any other Android OEM and keep the division at arms length, giving it no special access or Android favors. Yet, Motorola has continued to lose market share and revenues. Last week, Google said that its Motorola division lost $271 million and revenues declined from $1.51 billion in Q4 to $1.02 billion in Q1 2013.
Clearly, Google needs to do something differently in its relationship with Motorola.
Motorola is reportedly developing a new “X-phone” handset to compete more effectively in the Android universe (mostly against partner Samsung). But, a few more quarters of weak performance and Google will need to write down the value of the Motorola investment.
*Source: comScore (August 2011 data include non-smartphone share; February 2013 data only reflect smartphone share)
Motorola’s patent portfolio also has become quite a bit less valuable over the last 18 months.
Google’s use of the Motorola patents has largely been neutralized by negative judicial and quasi-judicial decisions — such as the most recent defeat against Apple in a patent suit ruled by the US International Trade Commission. In addition, in its antitrust settlement with the FTC, Google agreed to license Motorola’s “standards-essential” patents on reasonable terms and not use them “offensively” in litigation, as the company had been doing.
Google can still use Motorola’s patents as a defensive shield, I suppose. But the value of that portfolio is now substantially less than when Google bought the company. While it may yield some tax benefits, Motorola has become an undisputed drag on Google earnings.
The company needs a big hardware win in the next year or the Motorola investment will turn out to have been a $12.5 billion mistake.