Will Google make its own phones or not?

[poofyhairguy]

The Droid 1 was kind of a Nexus for Android 2.0. It didn't have the Nexus name, but it was a vanilla Google device, fully open, and almost no carrier bloat. Came along before Google even thought up the Nexus brand.

Hmmm... If that is the case then Moto had two Nexuses: Droid 1 and Xoom

 

[mammador]

Yeah, but they'd also be killing another bird they don't want to kill, and that's the remaining Android hardware manufacturers.

What would a Motorola Nexus achieve that a Samsung, HTC, or LG Nexus can't already achieve today? Google already does those things you suggested/listed as a benefit for a future "Motorola" Nexus.
There's no proof that it will make their Motorola division turn a profit. There's no proof that the US carriers will accept such a device and subsidize them. Selling devices at full price in the US is a failure. See Nexus One for more info on that. Your point about "use their own capability to make Nexus phones" is largely thrown out of the window.
What makes you think Verizon would be more likely to allow a Motorola Nexus to run Google Wallet when a Samsung Galaxy Nexus cannot?
See Google Wallet on Galaxy Nexus for more info on that. Your point about "advancing Android" is largely thrown out of the window there.

Motorola is mainly a US company(that's where most of their revenue is today...from "Verizon's "Droid" branding which doesn't exist once you leave the US). If they can't win in the US market, they can't win anywhere else in the world. If you go to Europe or Asia and ask them about Motorola, they will say "Moto who?"

I just doesn't make sense to me to enter into a future alliance to make the Nexus 4 for example, when Google already owns all of Motorola's capability. Why make a deal with Samsung when you have all the apparatus to make a phone yourself? It simply is a waste of resources and personnel.

They may have bought Motorola solely for the patents, but Motorola as you say yourself is a big US brand. Google then by default has a substantial share of handset sales, granted of its own platform. The only strategic option that makes sense IMO is to divest Motorola's phone making arm (and all constituent parts like R&D, marketing, etc.) and retain the intellectual property rights for the patents.

 

[s44]

I just doesn't make sense to me to enter into a future alliance to make the Nexus 4 for example, when Google already owns all of Motorola's capability. Why make a deal with Samsung when you have all the apparatus to make a phone yourself? It simply is a waste of resources and personnel.

Because Samsung has the best components in the biz: best SoC (thanks to excellent fab), best display tech... Same reason we buy their phones.

Moto has a certain design aesthetic (though the corners on their new stuff look horribly ugly to me) and a great relationship with Verizon. It would be a good idea for Google to force some small changes to make Moto devices more enthusiast-friendly (bootloader unlocks and AOSP kernels available--but not installed or officially supported--for all devices at launch), but I don't think we'll see much more than that.

 

[lothar]

Having been through multiple M&A's myself, I just can't see this as a plan from the beginning.

MOTOROLA MOBILITY DEAL BY GOOGLE
In fact, according to the filing, Google senior vice president Andy Rubin first reached out to Motorola Mobility in early July 2011 to discuss the purchase by some of Google’s competitors of the patent portfolio of Nortel Networks Corp., and to assess its potential impact on the Android ecosystem.
Google boosted its offer for Motorola Mobility by 33% in a single day in early August, even though Motorola wasn’t soliciting competing bids. The aggressive bidding by Google showed that the search giant was under considerable pressure to beef up its patent portfolio to protect its promising Android franchise from a growing number of legal challenges.
According to the filing, Google and Motorola began discussions about Motorola’s patent portfolio in early July, as well as the “intellectual property litigation and the potential impact of such litigation on the Android ecosystem.”
Although the two companies discussed the possibility of an acquisition after the initial contact by Mr. Rubin, it was only after Motorola pushed back on the idea of patent sale that the acquisition talks picked up steam.
The turning point came during a meeting on July 6. At the meeting, Motorola CEO Sanjay Jha discussed the protection of the Android ecosystem with Google senior vice president Nikesh Arora, and during that talk Jha told Arora that “it could be problematic for Motorola Mobility to continue to as a stand-alone entity if it sold a large portion of its patent portfolio.”
In connection with these discussions, the two companies signed a confidentiality and non-disclosure agreement that allowed Google to do due diligence on the company’s patent portfolio.
On July 21 and July 23, Jha met with Arora and Rubin to discuss strategic options between the two companies, agreeing to continue to discuss a potential sale.
On July 27, Motorola pushed the sale idea even harder when it requested that Google expand its confidentiality agreement to cover due diligence relating to a possible acquisition of Motorola.
Google got the message. The next day, Mr. Jha, Mr. Arora and Google chief legal officer David Drummond met to discuss the terms of an acquisition of the whole company. Arora and Drummond talked price for the first time, telling Jha that Google was considering an offer “in the range in the high $20s or low $30s.”
On August 1, Google sent Motorola a letter offering the company $30 a share, and requested a response by August 4. The same day Motorola hired Qatalyst Partners and Centerview as its advisors.
On August 5, Motorola, advised by Qatalyst Partners, rejected the offer and suggested $43.50. Qatalyst Partners suggested to Drummond that Google increase its price to $43.50 a share.
On Aug. 9, Arora came back with an offer of $37 a share over the phone to Jha. Jha told Arora that he would be prepared to recommend that its board consider accepting an offer of $40.50 or higher.
Later that day, Google responded with a new offer of $40 a share.
On August 14, Motorola director Daniel Ninivaggi told the board that Carl Icahn, a large shareholder of the company who had urged Motorola to explore alternatives to its patent portfolio, would support the proposed merger without a voting agreement.
On the morning of August 15, the two companies entered into a merger agreement at the offered price of $40.
On November 17, Motorola Mobility stockholders approved the proposed merger with Google Inc.

http://en.wikipedia.org/wiki/Motorola#Split
But then again, it's Wikipedia.

 

[lothar]

I just doesn't make sense to me to enter into a future alliance to make the Nexus 4 for example, when Google already owns all of Motorola's capability. Why make a deal with Samsung when you have all the apparatus to make a phone yourself? It simply is a waste of resources and personnel.

They may have bought Motorola solely for the patents, but Motorola as you say yourself is a big US brand. Google then by default has a substantial share of handset sales, granted of its own platform. The only strategic option that makes sense IMO is to divest Motorola's phone making arm (and all constituent parts like R&D, marketing, etc.) and retain the intellectual property rights for the patents.

Because Samsung has the better SoC's, better screens, and everything else? The only place Motorola beats Samsung is in aesthetics. I realize that may be a big deal for some people that want a well built phone and not just cheap plastic, but for me functionality > aesthetics.

That's exactly what I've been saying from the very beginning with my analysis in this thread.

 

[lothar]

I'd say pull moto out of the commercial channel, the only reason they aren't bust there already is US carriers branding. This opens up the android market to competition between manufacturers and maybe lowers verizons influence on the android market in the US.
It also means that Google then isn't in competition with the other handset makers.
Also Google can streamline Moto production and maybe stop them losing money, but that wouldn't be such a problem if the loss was counted as part of Googles R&D.

So in essence, you'd be throwing out the 29% market share Motorola has in the US with bath water. That's throwing free money away.

Android is already open to competition. In fact you are lowering competition by removing Motorola from the group. How does removing a competitor increase competition? Almost sounds like the same thing AT&T execs are preaching that competition would actually increase more by them acquiring T-Mobile and divesting a few units to LEAP wireless and Metro PCS. :hmm:

Verizon's influence won't be lowered one bit. Verizon owns the "Droid" brand. There will always be a manufacturer that wants to create phones for it. Verizon's "Droid" brand is a cash cow for both Verizon and whoever the manufacturer is that adopts it on their phones.

If activists investors couldn't do it for a decade, I doubt Google would be able to do it while keeping Motorola's entire businesses intact.
If Google makes Motorola abandon the "Droid" brand and make only Nexus devices exclusively, they'd have to cut 90+% of the fat in their corporate division to makeup for the potential massive shortfall in revenue.

Why should Google have to take a loss on Motorola as part of their R&D budget? A loss is a loss, it doesn't matter what accounting tricks are used to hide it.
What's next, "pro forma" earnings?

 

[smartpatrol]

So in essence, you'd be throwing out the 29% market share Motorola has in the US with bath water. That's throwing free money away.

Android is already open to competition. In fact you are lowering competition by removing Motorola from the group. How does removing a competitor increase competition? Almost sounds like the same thing AT&T execs are preaching that competition would actually increase more by them acquiring T-Mobile and divesting a few units to LEAP wireless and Metro PCS. :hmm:

Verizon's influence won't be lowered one bit. Verizon owns the "Droid" brand. There will always be a manufacturer that wants to create phones for it. Verizon's "Droid" brand is a cash cow for both Verizon and whoever the manufacturer is that adopts it on their phones.

If activists investors couldn't do it for a decade, I doubt Google would be able to do it while keeping Motorola's entire businesses intact.
If Google makes Motorola abandon the "Droid" brand and make only Nexus devices exclusively, they'd have to cut 90+% of the fat in their corporate division to makeup for the potential massive shortfall in revenue.

Why should Google have to take a loss on Motorola as part of their R&D budget? A loss is a loss, it doesn't matter what accounting tricks are used to hide it.
What's next, "pro forma" earnings?

The moment the acquisition is finalized, Motorola is effectively selling Android phones subsidized by Google. You can bet that Samsung, HTC, and the rest of their handset partners are NOT thrilled about this. If Google stays on this course, I wouldn't be surprised to see HTC and Samsung thinking "outside the box" in order to gain more leverage against Google. . . e.g. replacing Google search with Bing, including Amazon App Store on their devices, maybe even teaming up with Amazon to make Kindle-branded phones or with MS to focus more on Windows Phone.

Not to mention, Samsung has their own OS now (Bada) that sold more than Windows Phone did last year. I can't imagine Google would want to risk pushing away an industry leader like Samsung just so they can lose money keeping Motorola running.

The only sensible option IMO is for Google to divest themselves of everything but Motorola's patents. Then again, you have to wonder who would want to buy Motorola after they have been stripped of their most valuable assets. It would have to be a company with:
a) a very strong patent portfolio, otherwise they will be defenseless
b) a record of returning a failing business to profitability
c) several billion dollars on hand to make the purchase

Any candidates you can think of? Also, is it feasible to simply liquidate the company and sell it off piece by piece? Any precedents for this?

 

[mammador]

The moment the acquisition is finalized, Motorola is effectively selling Android phones subsidized by Google. You can bet that Samsung, HTC, and the rest of their handset partners are NOT thrilled about this. If Google stays on this course, I wouldn't be surprised to see HTC and Samsung thinking "outside the box" in order to gain more leverage against Google. . . e.g. replacing Google search with Bing, including Amazon App Store on their devices, maybe even teaming up with Amazon to make Kindle-branded phones or with MS to focus more on Windows Phone.

Not to mention, Samsung has their own OS now (Bada) that sold more than Windows Phone did last year. I can't imagine Google would want to risk pushing away an industry leader like Samsung just so they can lose money keeping Motorola running.

The only sensible option IMO is for Google to divest themselves of everything but Motorola's patents. Then again, you have to wonder who would want to buy Motorola after they have been stripped of their most valuable assets. It would have to be a company with:
a) a very strong patent portfolio, otherwise they will be defenseless
b) a record of returning a failing business to profitability
c) several billion dollars on hand to make the purchase

Any candidates you can think of? Also, is it feasible to simply liquidate the company and sell it off piece by piece? Any precedents for this?

To own a known and respected brand?