Google's Motorola Deal Promises to Shake Up Mobile Technology Industry

Uploaded by PBSNewsHour on 16.08.2011

bjbjLULU JEFFREY BROWN: And finally tonight, the business of mobile technology, smartphones
and much more, just got a big shakeup. Internet giant Google announced plans to buy Motorola
Mobility yesterday, the price tag, $12.5 billion. It's the largest purchase ever for the 13-year-old
tech giant that's best known still for its search engine. But, in recent years, Google
has also made a big play for the smartphone market through its Android operating software
system. Launched in 2007, Android is now used in more than 150 million devices worldwide,
including some 43 percent of the market for smartphones. By comparison, Apple's operating
system, which is run only on Apple products, such as the iPhone and iPad, makes up 18 percent
of the market. Now Google has taken another big bet, deciding to make and own the hardware,
the devices themselves, by buying its own manufacturer. Motorola Mobility itself split
off from the larger Motorola company this past January. It has 19,000 employees. The
deal potentially pits the Google against some of its own business partners, other device-makers
that use Android software, such as Sony Ericsson. But Google can gain another important asset
in the deal: control of Motorola's more than 17,000 patents, plus another 7,500 still awaiting
approval. And we look at the deal and the mobile tech business now with Staci Kramer,
editor of, a website that covers the economics of media and technology,
and Charles Golvin, a principal analyst for Forrester Research. Charles Golvin, start
with the issue of manufacturing phones and other devices. How does owning a company does
that fit into Google's larger strategy? CHARLES GOLVIN, Forrester Research: Well, it's mainly
about competing better with Apple, who owns the entire soup-to-nuts control of the software,
the hardware, the content that they sell, and the channels that they distribute the
devices through. And Google, because they license their software to manufacturers like
Samsung and LG, they don't control those pieces, the hardware pieces. They just control the
software pieces. So acquiring Motorola gives them more of that top-to-bottom control over
the total phone or tablet experience. JEFFREY BROWN: And, Staci Kramer, if you put this
in a larger context, this is clearly part of the continuing move towards mobile computing
generally, right? STACI KRAMER, paidContent.Org: Well, it is. I mean this is Google's way of
literally being -- being in your pocket, being on your tablet, being everywhere you are straight
through the day. Larry Page said on the last earnings call, the CEO of Google, that he
really likes to look at new products or new ideas that are -- make Google like brushing
your teeth. They're just something you just use and you don't really even have to think
of. And this is, to me, another one of those kinds of things. JEFFREY BROWN: Now, Charles
Golvin, much has been made of this patent issue, in fact, some people seeing it as even
the major part of the deal. Now, explain that, why these -- Google getting control of these
thousands of intellectual property patents that the Mobility company has, why is that
important? CHARLES GOLVIN: Well, it's important because the negotiations among the phone manufacturers,
the wireless operators, the software makers are really a horse-trading game of: I have
these patents that are required for you to make your product. You have some patents that
I need to license in order to make my products. And they come to some kind of common ground.
And maybe it results in payments in one direction or the other. But those assets that you bring
to the table are critical in not making you a seller, if you will, you know, of revenue.
So, having an equal stake or a strong portfolio of patents allows Google to be at the table
and have something to offer in trade and not have to pay out too much revenue or their
partners pay out too much revenue, or face lawsuits for, you know, violating others'
patents. JEFFREY BROWN: What -- what -- can you give me an example of the kind of patents
we're talking about, to help people understand this? CHARLES GOLVIN: Yes, I will give you
an example of a very simple one that people might not even think about as a patentable
idea. But, for example, when your phone -- when you receive a call, the network delivers a
phone number. And there's software inside your phone that looks at your address book,
looks up that number and says, oh, that's so-and-so and then presents so-and-so's name
to you or maybe even a picture of you. Nokia owns a patent on that concept. So any phone
that wants to do that, any phone manufacturer who wants to deliver that service has to license
that patent from Nokia in order to be able to do that legally. JEFFREY BROWN: Now, Staci
Kramer, what about another aspect that I mentioned in the introduction, which is this potential
problem that Google would be competing with its current partners in some sense? STACI
KRAMER: Well, it will be. And, you know, I think it's still not clear to me that -- how
Google is going to run this as a separate business, which it intends to do, which helps
protect its partners, which helps protect all these other ideas, but at the same time
achieve that kind of Apple-like integration, that ecosystem, that gives it control over
so many things. I don't see how exactly they're going to pull this off yet. But it does give
-- you know, it makes Google both a competitor and a protector at the same time. If they
can manage to walk that line and do it, it will be quite a feat. JEFFREY BROWN: Well,
Charles Golvin, it was interesting to be reading the tech -- tech blogs and information today.
There was all sort of debate about whether this was a good idea or a colossal mistake.
So, it's things like that about how -- whether they will be able to carry it off, that's
what -- that's what is driving this debate? CHARLES GOLVIN: That's part of the debate,
certainly. I think much of the same analysis pertained to Microsoft's deal with Nokia,
forming a strategic relationship, and questioning whether other licensees of Microsoft software,
again, Samsung or LG, might see themselves at a disadvantage because Nokia might get
special access to the software or unduly influence the design of Microsoft products. And the
same questions pertain here when it comes to Google and its Android licensees, whether
they will be treated equally and have the same access as Motorola, who is now part of
Google. JEFFREY BROWN: Now, Staci, you -- you started talking about how this is Google and
others trying to reach us in a lot of new ways. So, this is more than just -- I mean,
eventually, this is more than just about smartphones, right? STACI KRAMER: Absolutely. It's more
about smartphones. Now, some people have suggested that really the cable business is an afterthought
in a sense and the broadband business to what Google is acquiring in terms of the patents
and the Android side, but it is a significant moment, because Google has not been able to
get Google TV to take off, its own real entry into the living room. By acquiring Motorola
Mobility, it has instant entree to living rooms all over the U.S. Whether they're Comcast,
whether it's Charter, whether it's Direct -- any of the other major cable operators,
it has some way in. In my own house today, I just picked up a cable modem with the highest
level of potential. And my first -- the only option actually that I was offered when I
went to Amazon was a Motorola broadband modem. So, they are already there. And what they
do to take advantage of that is the next question. Can they put Google TV -- can they make that
set-top box an entree, not only into the living room, but actually into partnerships with
the cable operators? JEFFREY BROWN: Well, so, Charles Golvin, that means this is sort
of part of a much larger tech war among a number of companies, right, Google, Apple,
Microsoft, others. Where are we now in that struggle? CHARLES GOLVIN: Well, it absolutely
is a struggle for people's digital lives. More and more consumers today own multiple
connecting devices, not just a smartphone, not just a tablet, but P.C.s and other devices
that connect to the Internet and the services that are critical to their daily lives. And
every one of these companies, whether it's Apple or Google or Microsoft, they want to
be the brand and services behind that experience, no matter which device you happen to pick
up. And Motorola does have presence in all of these categories, in phones, in tablets,
in television set-top boxes, even in some home products like security cameras and the
like. And so this is really about being the brand that you go to and the services that
you need, no matter what screen you might be looking at. JEFFREY BROWN: And, Staci Kramer,
just briefly, this does have to go through some antitrust -- gets a look at least from
the Justice Department, right? STACI KRAMER: Well, I think it will get more than a look,
although I don't think we're looking at anything quite as intense as AT&T/T-Mobile, for instance.
But it does need a look. It does need approval. And that is one of the reasons that you will
hear the constant stressing of, this is a separate operation. They want no mistake.
They want this to be seen as something that doesn't -- that enhances them, but doesn't
given them, like, world domination. JEFFREY BROWN: All right. Staci Kramer, Charles Golvin,
thank you both very much. CHARLES GOLVIN: Pleasure. urn:schemas-microsoft-com:office:smarttags
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