It's been over 24 hours since Google dropped the bombshell that they were acquiring Motorola - for patents and possibly more - all to 'protect Android.' Let's take a look at some astute analysis:
There’s no denying that Google’s maneuver this morning to acquire Motorola for $12.5 billion in cash is remarkable. Everyone is talking about every possible angle of the deal, as they should. The summertime is usually the doldrums when it comes to tech news. Not this year. Google is pulling off an acquisition that is larger than any that Microsoft, Apple, or any of their other main competitors ever have. Larry Page, wartime CEO. Larry Page, maverick.
As the resident Apple enthusiast around these parts, many of you want my take on this — and many of you probably don’t want my take on this, but will end up reading it twice as much as those who do. But don’t worry, I’m not going to go all Dan Lyons and immediately run my mouth without thinking. I actually took the entire day to think about this, read over the insane amount of coverage (though I didn’t get through even half of it), and form some thoughts.
But my main thought is the same as my initial one: this is either the smartest thing Google has ever done, or the dumbest. There is no in-between.
Dan Fromer at his new blog, SplatF has put together a list of winners and losers.
After a first set of quick thoughts, I want to do a follow-up because shortly after that post I saw a Bloomberg report on the reverse break-up fee Google and Motorola Mobility (MMI) agreed upon: it's a whopping, mindboggling $2.5 billion that Google has to pay to MMI if the deal falls through. I'm still researching this but it seems that this is, in relative terms, the highest-ever break-up fee agreed upon in this industry.
"On an equity value basis, Google’s fee amounts to 20 percent, compared with the 4.2 percent median since last year", reports Bloomberg. The same source that told Bloomberg the $2.5 billion figure claims that MMI "would pay a $375 million breakup fee if it decides not to sell to Google".
I listened to the executives on today's conference call on the deal and they exuded confidence. But if they were really so sure that regulatory approval is a slam dunk, there wouldn't be a break-up fee that is completely out of the ordinary. Money speaks louder than words in a case like this.
I was previously skeptical that this deal is really about "protecting" Android from threats, and I monitor Apple's and Microsoft's disputes with MMI quite closely. Now that I see the break-up fee and have thought some more about the overall situation, I've reached the point at which I simply don't buy the "protection" theory anymore.
Google’s proposed $12.5 billion acquisition would leave RIM a smaller player relative to rivals, which may force it to strike an alliance with another company or sell itself to remain competitive, said Will Stofega, a program director at consultant IDC. With Google’s cash and software expertise, Motorola may present a direct challenge to RIM in its traditional stronghold, the corporate market, he said.
“Now that Motorola has a big war chest behind them, Research In Motion has got to watch out,” Stofega said in an interview.
Already losing market share in smartphones, RIM is seeing several competitors beyond Google and Motorola gain scale and expertise. In February, mobile-phone maker Nokia Oyj struck a strategic partnership with Microsoft Corp. (MSFT), the world’s largest software maker. Last year, Hewlett-Packard Co. (HPQ), the world’s largest computer company, bought handset maker Palm Inc. Apple Inc. (AAPL), maker of the iPhone, briefly became the world’s most valuable company last week, though it hasn’t made major acquisitions.
RIM may need more size and software expertise to compete, saidChetan Sharma, an independent wireless analyst. The Waterloo, Ontario-based maker of BlackBerrys may have to sell to a company such as Hewlett-Packard, Dell Inc. (DELL), Samsung Electronics Co. or HTC Corp. (2498), he said.
“They are in no man’s land at this point,” Sharma said in an interview.