A cunning plan
With the dust having settled for a day since the announcement of Google's planned acquisition of Motorola Mobility, some interesting new perspectives are filtering through. I've also had a chance to chat to some industry insiders and get their views.
The issues everyone is now trying to get to the bottom of are: what were the circumstances behind the deal, and what are its broader implications. Let's have a look at those in turn.
There has been an entertaining blogosphere spat catalysed by a post from Dan Lyons, who was ‘the fake Steve Jobs' in a previous life, entitled ‘Suck on it, AppleSoft - Google pulls a rope-a-dope'. In it Lyons suggests that the Moto deal is all part of some grander scheme, in which bidding up to $4 billion for the Nortel patents was just a cunning plan to make Google's rivals pay over the odds.
Lyons also had a fairly unsubtle pop at TechCrunch writer MG Siegler, who responded via his personal blog. Siegler insists Google really did want those Nortel patents, and when it lost the auction it had to do something, with buying Moto one of the few options available.
Siegler also points to a GigaOm report that claims Google was under a lot of pressure to acquire Moto - and its 17,000 patents - because Microsoft was sniffing around it too, and that would have made the Android patent situation even more precarious than it already is.
And Moto seems to have been all too aware of how desperate Google was. Don't forget Moto has been a major focus of billionaire activist investor Carl Icahn for some time, and he knows how to maximize shareholder value. It was he that put pressure on Google by urging the Moto board to consider selling its patents, and latterly even contemplated suing other Android OEMs. And, no doubt, he ensured the massive reported $2.5 billion reverse break-up fee Google will have to pay Moto if the deal falls through. Here's a clip of him talking about the deal, sorry if it starts automatically - blame Bloomberg.
I still believe that Google plans to use this deal to help sort out the fragmentation problems that have been dogging Android for a while - on which more overleaf - but that could be as much down to making a virtue out of necessity as part of an established strategy.
As Apple-watcher John Gruber concluded in his commentary on the Lyons/Siegler spat: "I think Motorola knew they had Google by the balls. Google needed Motorola's patent library to defend Android as a whole, Motorola knew it, and they made Google pay and pay handsomely."
The question is: was it worth it? Ideally Google will have acquired enough patents to ensure nobody can sue Android for fear of Google's counter-attack. But as patent expert Florian Muller tweeted: "Motorola's patents are far too broadly-licensed in this industry to lend themselves to mutually assured destruction. Most analysts #fail."
The patent situation has looked a lot like the cold war arms race Muller alluded to for some time. Patents are being lined up against each other in their thousands like so many nuclear warheads, and a MAD-like stalemate is desirable. But given that Google has acquired a potential 17,000 patents from Moto, and I've heard that Nokia alone has more like 42,000, maybe the fall in InterDigital's share price yesterday was premature.
Regardless of how cleverly Icahn played the game, it's hard to believe Google would have shelled out $12.5 billion on a company just for its patents, especially if they still left Android open to litigation, so there must have been other anticipated benefits from the deal. I will explore them on the next page.