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Why Google Shelled Out $12.5bn

I think it’s fair to say that Google is going through one hell of a transition. Within the past few months, it has appointed Larry Page as its CEO, launched the most rapidly growing social network ever and completely redesigned most of its core services. Google, it seems, has decided that it wants to be top dog.

Motorola Xoom

With yesterdays announcement (15/08/2011) that the Mountain View-based company is set to acquire Motorola Mobility (read: Motorola’s mobile devision) for a staggering $12.5 billion, it seems the model of controlling the hardware as well as the software has finally come out as dominant.

Before I get to the obvious comparison with a certain fruit-based company from California, I want to quickly think about that price. $12.5bn. Twelve and a half billion dollars. That’s $40 a share, a mark-up of 63% on Friday’s closing price. Now, to me that says that Google wanted this badly—it almost seems that they were desperate to acquire a hardware company. Even in the ‘money-may-as-well-be-our-wallpaper’ world of Google, $12.5bn is a lot to drop on one acquisition, and the mark-up of 63% makes me think that they had a hard time selling this to the Motorola board.

All of this points to a situation where Google may feel like they’re playing catch up in the mobile space; after all why else would they need to “supercharge Android”? They tried to do it differently: they acquired Android, then gave it away for free to get the best coverage they possibly could, and it worked. Android has a fantastic market share. So why does Google think they need a hardware company? My only logical explanation is to take on the big one—Apple.

Mobile Market Share

Ever since the iPhone dropped in 2007, Apple has made the software and the hardware on their mobile devices. By anyone’s standards, it’s done them pretty well; you don’t get to be the biggest company in the world without a few good ideas. So now Google seems to have woken up and realised that maybe, in order to get a solid user experience on their software, they should probably make sure the hardware is up to scratch.

Now, if this is the true reason why this acquisition went down, I would say this is a fantastic move by Google. As a former Android user, I was appalled by the experience on the platform at times: the huge fragmentation, the plethora of bugs, the lack of standards in the UI, the choppiness of the whole UX. Now, if Google can make sure, in-house, that the phones/tablets that are sold at the retailers are absolutely rock-solid in performance, usability and design…well…player two has entered the game.

Of course, the elephant in the room is that this deal could not have had anything to do with bolstering the quality of Android, but rather bolstering Google’s patent portfolio. Google has fought its way into a corner when it comes to the current round of patent litigation being hurtled around by the big technology firms. Its Android OS supposedly infringes on so many patents that $12.5bn to shore up its counter-suing arsenal is practically a bargain. I have a horrible feeling that this may be the real reason Google coughed up the cash for Motorola, but, being the eternal optimist I am, I’m still glad Google has a hardware manufacturer in-house, if only for the interesting devices that could come out of Mountain View in the near future.

Of course, I’m not the only person in the world; what else could this acquisition mean? Is there something else that dwells in the midst of this gargantuan deal? Is this just the first stage in an across-the-board attempt to buy up Android phone makers? Does Google just really hate MotoBlur? Leave us a comment or let us know on Twitter or Facebook.

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2 Comments

  1. Posted 04/01/2015 at 3:00 PM | Permalink

    Hello i aam kavin, its my first time to commeting anywhere, when i read this article i thought
    i could also make comment due to this brilliant paragraph.

  2. Posted 26/03/2016 at 12:38 PM | Permalink

    贫穷就是无能,就是罪恶。

One Trackback

  1. By עבודה בחקלאות בשוויץ on 23/11/2015 at 10:19 PM

    עבודה בחקלאות בשוויץ…

    … עבודה בארה”ב – חיפוש עבודה בחו"ל דרך הסוכנות היהודית וסוכנויות דומות עבודה בבריסל, המעסיקות לרוב ההדרכה. – מכיוון שקבלת פספורט ומעבר לאנגליה הם תהליך שיכול לקחת לעיתים גם קורסים של שפת המ… Why Google Shelled Out $12.5bn – TechRant ……

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