Tuesday, August 16, 2011
Google's patent play: US$12.5bil for Motorola Mobility
Google is spending $12.5 billion to buy Motorola Mobility. But the big prize isn't Motorola's lineup of cellphones, computer tablets and cable set-top boxes.
It is Motorola's more than 17,000 patents - a crucial weapon in an intellectual arms race with Apple, Microsoft and Oracle to gain more control over the increasingly lucrative market for smartphones, tablets and other mobile devices.
If approved by federal regulators, the deal announced Monday could also trigger more multibillion-dollar buyouts. Nokia Corp., another cellphone manufacturer, and Research In Motion Ltd., which makes the BlackBerry, loom as prime targets.
The patents would help Google defend Android, its operating system for mobile devices, against a litany of lawsuits alleging that Google and its partners pilfered the innovations of other companies.
In addition to the existing trove of patents that attracted Google's interest, Motorola, which introduced its first cellphone nearly 30 years ago, has 7,500 others awaiting approval.
Phone makers and software companies are engaged in all-out combat over patents for mobile devices. The tussle has been egged on by the U.S. patent system, which makes it possible to patent any number of phone features.
Patents can cover the smallest detail, such as the way icons are positioned on a smartphone's screen. Companies can own intellectual-property rights to the finger swipes that allow you to switch between applications or scroll through displayed text.
Apple, for example, has patented the way an application expands to fill the screen when its icon is tapped. The maker of the iPhone sued Taiwan's HTC Corp. because it makes Android phones that employ a similar visual gimmick.
The iPhone's success triggered the patent showdown. Apple's handset revolutionized the way people interact with phones and led to copycat attempts, most of which relied on the free Android software that Google introduced in 2008.
Android revolves around open-source coding that can be tweaked to suit the needs of different vendors. That flexibility and Android's growing popularity have fueled the legal attacks. About 550,000 devices running the software are activated each day.
Many upstart manufacturers, like HTC, had only small patent portfolios of their own, leaving them vulnerable to Apple Inc. and Microsoft Corp.
Getting Motorola's patents would allow Google to offer legal cover for HTC and dozens of other device makers, including Samsung Electronics Co., that depend on Android.
The deal is by far the largest Google has pursued in its 13-year history. Motorola Mobility's price tag exceeds the combined $10.2 billion that the company has paid for 136 previous acquisitions since going public in 2004, according to filings with the Securities and Exchange Commission.
Buying Motorola also would push Google into phone and computer tablet manufacturing, competing with other device makers who rely on Android. The largest makers of Android devices are all supporting a deal that Google CEO Larry Page said was too tempting to resist.
"With mobility increasingly taking center stage in the computing revolution, the combination with Motorola is an extremely important step in Google's continuing evolution," Page told analysts in a conference call Monday.
Google pounced on Motorola less than two months after a group including Apple and Microsoft paid $4.5 billion for 6,000 patents owned by Nortel, a bankrupt Canadian maker of telecommunications equipment. -AP