Smartphones

Four ways the Google-Motorola deal will change the tech industry

While Google's acquisition of Motorola Mobility won't be one of the most expensive acquisitions of this era, it will be one the tech industry's most influential events.

Google's $12.5 billion purchase of Motorola Mobility will go down as one of the most important events in tech during this era. Other deals, such as AT&T's $39 billion buyout of T-Mobile USA, are worth more money, but none of them will have as big of an impact on the tech industry (and as much fallout) as the Google-Motorola deal. As I discussed on Twitter with Technologizer editor Harry McCracken on Monday, this is the most important acquisition in the technology space since the HP-Compaq $25 billion deal a decade ago.

Here are the top four ways that Googlerola will change the course of the tech industry.

1. The Android patent wars are over

Before Google bought Motorola, the Android ecosystem was in real danger of having innovation stymied by litigation. Microsoft, Oracle, and Apple were all bearing down on Google as well as Android partners Samsung and HTC over patent infringements. Motorola hadn't entered the fray yet, but with its long history in the wireless business there was the potential that it could use its treasure chest of patents to pile on to its chief Android rivals, Samsung and HTC. On August 11, my ZDNet colleague James Kendrick posted, "If Motorola turns its patents on other Android phone makers the platform will implode." And, that was on top of the overall intellectual property issues with Android itself, which affects all of the Android device makers. The problem for Google was that it didn't have enough mobile patents to fight back. That's the way these things usually work. One big company typically says to another big company, "Yeah, we might be infringing you there, but you're infringing us over here" and then it turns into a draw. With Motorola's 17,000 patents on its side, Google has essentially put an end to the Android patent wars. There will still be some final skirmishes, but don't expect much carnage.

2. Vertical integration has won

While Google is pledging to keep Android an open ecosystem and claiming that it will run Motorola as a separate business, it's pretty clear that Google also wants to have the option of producing its own hardware devices so that it can build prototypes, concept hardware, and leading edge devices to demonstrate its vision and point its ecosystem partners in the right direction. Google wanted to do this with the Nexus One smartphone and we also saw Google's hardware itch in the CR-48 laptop running Chrome OS. Of course, Google didn't have the expertise or infrastructure in place to handle the hardware business. With the Motorola Mobility acquisition, it will add over 19,000 new employees with supply chain, customer service, and hardware development skills. When Google wants to do its next leading edge Android device like the Nexus One, Nexus S, or Motorola Xoom, we have to assume that it's going to use its new hardware division to build it so that it can deliver exactly the device it wants and get it to market much more quickly. With Apple's continued success in mobile, BlackBerry's large (albeit fading) market share, HP's new hardware/software unification with WebOS, and now the Google-Motorola deal, it's becoming clear that vertical integration is winning in mobile. Going forward, look for the latest, greatest, high-end devices to all be vertically integrated, while many of the low-cost, copy-cat devices will come to the market later and be made by mass market manufacturers like Samsung.

3. Mobile consolidation has begun

Over the past couple years, the arrival of new mobile platforms and the expansion of mobile vendors have given buyers lots of new choices in smartphones and now tablets. However, even in a fast-growing market like mobile, the good times can't last forever. In 2011, we've already seen BlackBerry and Nokia drastically losing momentum, Windows Phone 7 and WebOS struggling to gain market share, and Android and Apple increasingly hogging the spotlight. Even within the Android ecosystem itself, there have been lots of new upstarts recently, including LG, Lenovo, Acer, and ASUS. All of them have been grasping for a piece of the expanding Android market, which has been dominated by the big three -- HTC, Samsung, and Motorola. However, leading up to the Google deal, Motorola was the only one of the Android vendors that lost market share in the smartphone market in Q2. Obviously, that's likely to change if and when Motorola morphs into the Google-branded Android devices. Nevertheless, Motorola's Q2 struggles are a sign that the Android market itself is already beginning to whittle down to fewer big players.

4. Google has to grow up

As a company, Google is only a little over a decade old. Despite its recent kerfuffles with government regulators and its dust-up with China, the company has lived a bit of an idyllic, Peter Pan existence. Its offices are like college campuses with free food, free transportation, and free personal services (cleaners, barbers, etc). Its employees are loosely organized, don't have to deal with a bunch of overbearing middle managers and bean counters (in most cases), and even get the ability to use work time to dabble with some of their own pet projects. Because Google's search engine has been such a major cash cow, it has given the company freedom to hire lots of engineers and computer scientists and loosely organize them in this unique environment. However, with search under greater pressure than ever from the social web, it could finally be time for Google to grow up and act like an adult company that has to closely manage expenses and account for the value that each of its employees brings to the organization. The Motorola acquisition could hasten the process, since it will add over 19,000 employees to a Google that currently has 29,000, and Motorola is a much more established company with traditional organizational standards. Of course, Google will talk about wanting to maintain its startup-like culture, but it will be interesting to watch and see if Motorola influences Google to become more of an accountable, grown-up company.

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About

Jason Hiner is the Global Editor in Chief of TechRepublic and Global Long Form Editor of ZDNet. He is an award-winning journalist who writes about the people, products, and ideas that are revolutionizing the ways we live and work in the 21st century.

32 comments
VeronicaT
VeronicaT

Two ideas here are important -- vertical integration and consolidation. Separately, they point to seriously diminishing competition, but together they equal a full-blown monopoly, something that's not healthy for any industry. I sincerely doubt that Goog's almost narcissistic culture would change simply due to the purchase of a bunch of patents, but all companies evolve eventually, and that will happen to Google, too. It will grow some moss and maybe even stop being the darling of the tech stock community. In fact, the purchase of all these patents points to an organization that is way less concerned with happy, innovative employees, and way more concerned with covering its own backside. They're armoring themselves with legal arguments against the numerous accusations they face now, and more importantly, those threats they know they'll face soon if they don't own the outside ideas they rely on so heavily. Some have even suggested the "innovation" aspect of the Goog employee's work week is just a smoke screen to give the impression Google actually innovates internally, rather than simply gleaning ideas from outside as they court smaller companies for possible purchase (e.g. Google/Groupon failed courtship, and Google's subsequent announcement of its own coupon service). MS got slapped for this behavior, and so should the Goog.

phope929
phope929

Like it! Now Google will have its own phones.

bill
bill

Motorola's corporate culture is a slow moving, political and divisive. Google's is free flowing, cooperative and innovative. Combining the two and creating a lucrative, innovative and productive company will be the huge challenge.

keithmcinnis
keithmcinnis

The standards of connectivity are about to change. Apple put the personal in computer and changed the world. "Googlerola" will do the same for wireless broadband devices and services. The 'choke point' is infrastructure--a dedicated wireless broadband infrastructure will have to be built to support the market. Sound grandiose? Motorola beat Bell Labs in 1983 with the first deployed cellular system. Demand has outstripped 'tower coverage' since that time but the industry grew as users grudgingly accepted the conveniences along with the limitations. A quarter of a million towers later and countless generations of standards upgrades and opening of bandwidth and we are still unable to meet user needs. Time for a new infrastructure for a new era in communications. Motorola started the first wave and it gave us the taste of wireless freedom (and for some wireless chains). A new wireless broadband infrastructure is the next critical step.

jimt007
jimt007

I am glad I am not the only one to be outraged by the "Grow up" comment. Listen baby boomers, you had things your way for a very long time. Time to retire, business is and continues to changed, the world has changed. The reason Google is a success is because it is not a stale, stagnant, bureaucratic monster. I appreciate you technical foresight, but I think your generational mindset on what a successful company "should be" has left me and many on this forum in utter shock. Sadly without scrolling up I couldn't remember the three other points you had because this left such a bad taste in my mouth. While you are entitled to your opinion, you may want to stick to the facts and leave your person feelings out of it. Here is the toll free number to AARP 888-687-2277, consider enrolling today.

brianoh99
brianoh99

I think as long as Goog can keep the bean-counters out of top management they will continue to develop. I for one hope they do succeed although I don't agree with every move they make.

pseudopygrapha
pseudopygrapha

While Mr. Hiner sees Google as a company which has not grown up, it seems many others see Google a company which has evolved. Just sayin'... :-)

ubergerm
ubergerm

I used to work at the Moto and it's "grown up" culture is one of the major reasons why Google is buying Moto and not the other way around. If Moto was not so grown up it would have enough innovation to have a mobile market all to itself as being the first mobile company in the world... Instead they were filling out management reports and performance reviews.

NJnewsource.com
NJnewsource.com

with 29,000 vs 19.000 employees at Motorola, that's a bit like David swallowing Goliath. Google sounds very mature already in stating that they will keep the companies separate. They complement each other, but hardware and software a two very different industries with very different focuses. It's much easier to "ship" digital ones and zeroes than it is a new peice of hardware. Now if only Google had purchasee wireless spectrum and offered unlimited data plans ... That is the true threat to innovation threatening future innovation.

jp
jp

Agreed w/@DannyGraham: Google must manage its Moto integration with great care. Whether Google continues to prove that humanism is good business depends partly on how well its existing managers learn the corporate language from their newly visceral perspective. While applying their core principles to the absorption process may require new fervency and focus as they design a handshake with old cubicularity, the new deal is also a great opportunity for thoughtful Apple polishers to compare Google's pending integration of Apple's castoff with the halting success of Apple's Intel-ification. Google's new model of convivial adulthood has a new arena in which to strut its stuff. As its management knows, it does this in an environment which - partly due to its prior innovations and absorptions - we don't have to wait, and we'll all surely see.

qtip20
qtip20

Why should google "grow up" and become yet another boring, political work environment of Corporate America? I wish all companies had as much fun at the office as they seem to enjoy.

sslevine
sslevine

Google seems to be very efficient in it's deliveries. This could only improve the Motorola experience. Case in point, the broken corporate email application. It took many months and updates for Motorola to correct a non-syncing client and make the agent automatically pull mail from Exchange as promised. The agent showed up in mobile Exchange settings as some unknown Apache entity, and email had to be manually synced....?? Motorola user sites had hundreds of posts kvetching, begging, scolding the company for breaking the most attractive feature in the later generation of Android O/S it created. A lot of the posters were IT pros for corporations, all looking for info & trying to buy a vowel. Droid 2 & Droid X, unfortunaltely, were considered by many companies, according to the posting, and rejected because this very important feature was not functional. Motorola was basically uncommunicative on the issue, with only a few of it's forum moderators giving out any info on this, and even they sounded puzzled. I'm still holding on to my 1st generation Droid, since everything works without a hitch. I can only believe Google's implementations will be better designed, tested, and delivered.

mpd15
mpd15

...just keep "6 Sigma" segregated specifically to Moto's manufacturing process'...or why not create a new "G-Moto" quality standard??? Don't lose the creativity and innovation....

Danny Graham
Danny Graham

Great stuff - but you aren't right regarding point 4. Google's culture is key to it's strategy - ie: continuous rapid innovation and imagination, taking risks and accepting failures as learning opportuniities. The biggest cause of mergers ending in demergers is where cultural change isn't managed with extreme care. Companies that look right for each other on paper turn out culturally to be unhappy bed fellows. I would think that Google will work very hard on a strategy to firewall the two businesses initially, with grass roots interaction being kept at arms length and closer integration only occuring at senior levels. Cultural change would then be drip fed and targeted at specific devisions and locations. Strong businesses are capable of having differing cultures where those business units require them to be effective.

davidmaxwaterman+techrepublic
davidmaxwaterman+techrepublic

I read somewhere that Apple were already sueing Motorola. If so, why would Apple be worried about sueing Googlerola?

DesertJim
DesertJim

Me, I want to see the end of the patent wars. Hopefully both the external and internal ones to allow Android to flourish. That's the way to get real innovation, irrespective of the underlying culture. Apple used to be the counter culture who would eat MS's lunch, but now they play the same games.

fkgaza
fkgaza

Maybe a bad example for this, but when Oracle purchased Primavera it discontinued support of Primavera P3, the DOS-like version of the product used by close to half of the large construction firms. Why? Not part of their core or future vision. Thus the analogy is Google "discontinues" the antiquated Motorola manu piece entirely, keeping just the patent parts they covet and unloading all of the manufacturing and management to highest bidder (e.g. HTC or similar). And my support for this argument is that Microsoft tried to get into manufacturing serveral times, and other than the XBox, I dont see a lot of success. And you can argue the XBox, while profitable, is a distraction. My two cents (this is fun; we are seeing a future Harvard business case in real time).

XWingz
XWingz

Jason Hiner, you do understand that the reason Google is doing so well is because it has such a great work environment right? So if Google "grows up" then all the great employees will go somewhere else. Just because you've never had a great work environment doesn't mean other people shouldn't. Go vent out your anger somewhere else.

Biff-NZ
Biff-NZ

Amazing, Google grow up, meet Mr Hiner's expectations of how a "grown up" company should act. We will have punch cards,time logs will be kept of when you logged in and out of your work station, you will have personal KPI's, that will reflect on Team KPI's, that in turn will impact Group KPI's. Of course Group KPI's will have a direct bearing on Area and Regional Performance expectations and Share Holder Satisfaction and Expectations. We will of course need to "Manage" these corporate outcomes now that we are grown up, so we will be investing team leaders, also Team Leader Managers, who will report to Group Managers, who in turn will report to Area Managers, who will report to Regional Managers who report to Natioal Managers. This of course will enhance our ability to enforce corporate standards and individual accountability, while enhancing and maintaining our "start-up culture" - Just like the big boys! Anyone like to come and be inovative, leadfing edge, thinking outside the box in Googles all new grown up environment?? Hands up??

dave.miller
dave.miller

If Google "grows up", innovation goes out the window. ...And the most valuable employees will probably leave.

Lou_Bi
Lou_Bi

Interesting article. Regarding point #4 & Google maintaining it's culture - well, as most past mergers seem to go, 'you are what you eat.'

johnpiers
johnpiers

"AT&T???s $39 million buyout of T-Mobile USA" This should read $39 Billion!

MikeChablis
MikeChablis

perhaps you haven't been reading much Jason lately. He's a young, hip Apple zealot, not the pudgy, nerdy MickeySoft guy. Maybe Google should launch an ad campaign painting google dude as the hip guy and now Apple dude has aged into the out-of-touch grown up barely able to comprehend the new technology and style. It's the circle of life.

gabertl
gabertl

And perhaps Google's hoping to avoid hardware problems as it moves into the "4G and beyond" era. Closer control over production lines may mean an end to the type of situation that seems to have befallen some batches of Google/Samsung Nexus S phones sold in Canada, over which Google remains remarkably uncommunicative after 4 months of, as you say about Motorola, "hundreds of posts kvetching, begging, scolding the company...": see http://www.google.ca/support/forum/p/Google+Mobile/thread?tid=49e8ca84071d51a4&hl=en&start=840 an issue which seems to be trending more and more towards a Samsung hardware problem, though Google supposedly is working on a software fix to minimize the disruption to 3G-intensive apps caused by spontaneously launched voice/text search popups.

MikeChablis
MikeChablis

While Google pumps out many products, the approach they take is to get it out there, whether "lab" status, or otherwise. They do have many bugs but when you release software, it only takes a download to get the next version. When in the hardware business you can't make production runs of buggy boards, not if you want to stay in business. I hope Google's zeal for innovation carries into the Motorola management but I don't think the cowboy style will apply well to the hardware business.

gbyshenk
gbyshenk

I agree here. The well-known 'indigestion' problems following mergers or acquisitions have to do with attempting to merge corporate cultures. But Google has stated that they don't with to make such a merger with Motorola Mobility, and I see no reason to doubt that.

Mosblest
Mosblest

Those patents have great value and Apple has always protected it's intellectually property. The one exception is the original Mac OS which they gave to M$ to develop business tools for. Hmmm...if you create something or innovate something it must be protected from theft. Copying, borrowing etc., without permission is theft. Apple's R&D as with MOTO is the Tech industry's most respected. The problem with Moto is that they have poor management and didn't keep up.

MikeChablis
MikeChablis

Jason's a big fan of the Apple style autocracy. That is how a grown up company behaves. If the leader knows everything, why try to innovate yourselves, just do what he says. Actually, to be fair to Jason, this article paints one of the most positive....er..., one of the least negative pictures of Google so far in his portfolio of blogs. Up until point 4 it has hardly even negative at all. I don't really agree that all patents are created equal and that by buying up Motorola's that Apple or MS don't have a claim at all. Yes, they can be used like poker chips but a white poker chip does not carry the same weight as a brown poker chip and I think the specifics of the existing claims need more study than just a count to conclude that the patent war is over. You think that bevy of patent lawyers are just going to stand around at the water cooler now?

keithmcinnis
keithmcinnis

Your point about hardware is well taken. Google knows it's core strengths and Motorola's core strengths. Google won't repeat the mistakes of MS and others. They will find new ways to make mistakes b/c innovations come from permission to explore. Google's culture will invigorate Motorola.

rhonin
rhonin

Unless there is a serious ROI or it is needed to allow a culture to grow, there exists non reason to hury or change an acquired business unit. I'd rather see some aspects of MMI become more like Google..... ;)

ubergerm
ubergerm

stilling someone else's idea is theft but trying to kill anybody who has similar idea it trolling. If I come up with idea of cooking food on the iron pan you later come up with idea cooking on the aluminum can, it should not give me a right to ban you from using your aluminum can.