Google made a defensive move against Apple and Microsoft. Microsoft should not have a knee-jerk response over this.
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The week got off to a bang with the folks at Google deciding that Motorola Mobility is the droids they are looking for, to the tune of $12.5 billion. In one fell swoop, a company that makes no tangible products and enjoys some of the highest profit margins in the industry suddenly wound up with a mobile handset vendor, and a struggling one at that.
In the fallout of this news, Om Malik is claiming Microsoft was also courting Motorola. Word of this made Google get off its tail and pay the premium price for Moto.
Google didn’t buy Motorola to be a handset vendor. It bought Moto for the same reason Microsoft had its eye on Motorola Mobile: the patents. Both Microsoft and Google wanted the deep patent portfolio at Moto to protect their respective ecosystems. Larry Page said flat out in his blog post explaining the deal “our acquisition of Motorola will increase competition by strengthening Google’s patent portfolio, which will enable us to better protect Android from anti-competitive threats from Microsoft, Apple and other companies.”
In a very prescient move, Creative Strategies analyst Ben Bajarin called this just five days ago. “Based on recent actions it can be concluded that Google knows they need to secure a more robust patent portfolio. More specifically they need a patent portfolio around mobile devices to help protect Android,” he wrote.
So now Google has bought itself a $12.5 billion boat anchor that many pundits are predicting will drain the company of resources (of at least $12.5 billion, obviously), time and energy. Acquisitions that big almost always cause a company in a competitive field to stumble. Remember, that was one of the warnings people had over Microsoft’s proposed $44 billion purchase of Yahoo; that the company would be set back for years in the search business, and possibly other areas as well.
Now, Microsoft does possibly lose a little here. Motorola Mobility CEO Sanjay Jha had expressed openness to selling Moto phones with Windows Phone 7 and 8, although given how much radiation Moto phones give off, I’m not too crushed at losing out on a Droid 2 Mango phone.
However, the company stands to lose a lot more if it reacts reflexively. I seriously doubt Steve Ballmer needs my advice, but I’ll offer it anyway: don’t be stupid and make a reactionary move. If Malik is right, you lost out on a good deal, but as of now, with Moto and Nortel off the market, your options fairly stink.
Samsung and HTC are out of reach. Nokia would be a massive mistake, and we’ve been over that already. If Microsoft wants to shore up Nokia, it should make the firm an offer for its Trolltech and NAVTEQ business units. That will give Nokia some cash and give Microsoft new product opportunities.
Research in Motion, while offering great back-end services through BES, is rapidly shrinking and Microsoft doesn’t need a company that’s in dire need of a turn-around with a competing operating system. If RIM collapses in a heap, like Nortel, then maybe it’s worth it for a bargain price, but I don’t want to see that happen to RIM.
Microsoft is a patent-rich company on the software side. Its successful squeeze of Android vendors proves that. What Microsoft needs to do right now is shore up Windows Phone 7.5 agreements and sit back and watch Google choke as it tries to swallow a $12.5 billion meal.
