NEW YORK – Google’s $12.5 billion agreement to acquire Motorola Mobility may not only make it a key mobile handset player and boost its Android mobile operating system, but could also benefit the Internet giant’s Google TV service.
The Google TV software platform allows TV sets and set-top boxes to access online video, but it has so far not taken off as much as Google would have liked. Given that Motorola is one of the biggest cable set-top-box makers, the deal could benefit the service.
Credit Suisse analyst Spencer Wang said in a report Monday that among potential benefits from the deal for Google “that we have not explicitly factored in” are “benefits from Motorola Moobility’s set-top-box business to Google TV.”
Barclays Capital pay TV analyst James Ratcliffe said cable operators will want to keep an eye on the deal’s effects as it could have benefits and risks for them. “Within the major cable [TV distributors], Comcast has the most proportional exposure to Motorola set-top-boxes, which are also the primary platforms for Verizon FiOS and AT&T U-Verse,” he said.
Pay TV providers “are likely to view this acquisition warily as an emerging competitor (Google Video/YouTube) now becomes a key vendor,” Ratcliffe said. But on the positive side, “this transaction could accelerate integration of Internet capability into cable set-top-boxes” as Google could become a “potential source of set-to-box innovation,” concluded Ratcliffe.
Experts also see Google’s acquisition of Motorola as taking a page from Apple’s playbook by taking control of hardware devices. “Google sees the need to arm itself with its own in-house device brand to compete effectively with Apple and create an iconic device line like the iPhone,” said Sharon Armbrust, analyst at SNL Kagan.
Still, Google was mainly focused on other objectives in striking the Motorola deal, particularly the future of the Android platform and securing patents that it will can use as technology firms increasingly fight over intellectual property, according to observers.
“Google is paying a significant premium to intrinsic value of Motorola Mobility, because there are few broad patent portfolios available in the marketplace today, and Motorola Mobility has one of the largest,” said RBC Capital Markets analyst Ross Sandler. “Google (via Android) and the various Android original equipment manufacturers are likely facing significant risk of licensing fees and lawsuits around the intellectual property used to build Android from Oracle, Apple, Microsoft and others.”
He argued that the likely outcome of all of such lawsuits would be licensing agreements among the Android original equipment manufacturers, “and with this acquisition Google vaults itself to the top of the food chain in terms of intellectual property and removes some of those future expenses,” Sandler explained.
Others echoed those views. Barclays Capital analyst Anthony DiClemente said that the acquisition of Motorola Mobility will give Google ownership of 17,000-plus approved and 7,500 pending patents. “Android has significant momentum, and as the Web increasingly shifts to mobile, we believe Google must protect its Android franchise, which is seeing over 550,000 daily device activations and has sold over 150 million devices.”
Added Elkin: “Buying a handset maker, in theory, gives Google the same degree of control over the Android ecosystem that Apple enjoys with iOS.”
However, Google “may also end up altering the balance with its hardware partners, making it challenging for Google to continue positioning Android as a truly open platform,” he added.
Google CEO Larry Page on Monday highlighted the importance of the deal, saying it will “super-charge” Android.
Google’s Android has a growing share of the smartphones market, which will hit 28 percent this year, up from 24 percent in 2010 and just 6% in 2009, according to eMarketer. Apple’s share is expected to grow to 30 percent this year from 28 percent in 2010, according to its estimates. In 2012, emarketer sees Android running on 31 percent of all smartphones, while Apple will hold steady at 30 percent.