Switched On: The accidental handset company, Part 1
Each week Ross Rubin contributes Switched On, a column about consumer technology.
Tech company acquisitions often seek to reshape a company or even the entire industry. Buying Applied Semantics catalyzed Google's rise to online advertising dominance. Apple's purchase of NeXT transformed the former's operating system's roadmap. And HP's merger with Compaq created a $40 billion powerhouse vendor of Windows PCs.
That's not the case for "Googorola," a portmanteau that the world formerly knew only as an Italian blue cheese often crumbled into steak salads. Indeed, Google's recent announcement of its intent to acquire Motorola Mobility for $12.5 billion may turn out to be the highest profile acquisition ever aimed at maintaining the status quo. Presaged by a blog post from Google's chief legal officer and punctuated by lockstep statements by Motorola's rival Android licensees praising legal protection, the blog post announcing the acquisition promised to "supercharge" Android. But the subsequent Google conference call regarding the merger reinforced that the "IP" Google seeks to acquire does not stand for "Incredible Phones." Google seeks to invigorate Android simply by having the freedom to progress unencumbered along the successful path it already has largely staked out.
Most of the discussion around the transformative nature of the deal has focused on three key areas of speculation – that Google will use Motorola to create Apple-like vertically integrated superphones, that Motorola's set-top business will be a pathway to Google's infiltration of the cable companies, and that the prospect of competing with Google will cause mass migration of licensees to Windows Phone 7. But none of these scenarios are likely to come to pass.
Googorola and the Apple model. This "new story" is actually an old story for anyone who remembers the first rumors around the "gPhone." At that time, Google noted that it wanted there to be thousands of Google phones. Why? Because, for all the rising tensions between Apple and Google that Switched On first discussed at the launch of the T-Mobile G1, Microsoft is the Google rival that is more focused on creating a universal handset platform via licensing. Apple, consistent with its Mac and iPad businesses, seeks to win by focusing on a limited, profitable share of the market with a strong user experience with iPhone. Both Google and Microsoft have shown they are willing to sacrifice their own handset efforts in the name of their licensed operating systems.
Speaking of the Nexus devices -- which have been built by other Android licensees -- their experience demonstrates the challenges that Google has in trying to sell its own idealized handsets in the US Nexus smartphones have been available in limited distribution (directly online or exclusively at Best Buy) and have not been part of carriers' portfolios. There are at least two factors behind this. First, Google has not wanted to compete directly with its licensees (Sound familiar?). Second, it can be difficult to create a "pure" Android experience as some expect Google might want to do with Motorola in the face of carrier customization demands.
Google is thus hamstrung with Motorola. It wants to keep the division profitable to meet financial goals and keep a major U.S. provider devoted exclusively to Android afloat. However, it can't offer the device maker an unfair advantage lest it alienate Android licensees and destroy the promise of the Open Handset Alliance.
Next week's Switched On will look at why Google's ownership of Motorola is also unlikely to bring much disruption to cable or bolster the competition.
Ross Rubin (@rossrubin) is executive director of industry analysis for consumer technology at market research and analysis firm The NPD Group. Views expressed in Switched On are his own.
