Logic behind the $12.5bn cash gauntlet

Why did Google shell out $12.5 billion in cash for Motorola, which commands just 2.4 per cent of the world's mobile market? For a number of strategic reasons.

Just five years ago, Motorola Mobility was one of the world's most popular mobile phone makers. The company was also the brains behind more than one out of every five phones sold globally.

So why did Google bother throwing down a US$12.5 billion (Dh45.9bn) cash gauntlet for a company that now holds a paltry 2.4 per cent of the world's mobile market?

For a start, Google is aiming to take a bigger bite out of the smartphone market by swallowing a treasure trove of some 10,000 patents under Motorola, which released the world's first commercial mobile phone decades ago, then followed that up with popular models such as the Razr and Droid.

Google's purchase will now allow it to package its Android software on all Motorola handsets and more directly compete against Apple's iPhone and Research In Motion's (RIM) BlackBerrys.

Yet Google's strategy for tapping Motorola's institutional knowledge is not just about coming up with a fancy new handset.

These days rivals such as Microsoft and Apple are "banding together in anti-competitive patent attacks on Android", wrote Google's chief executive, Larry Page, on the day of its acquisition of Motorola Mobility. Mr Page is hoping this new partnership will protect Google from future patent lawsuits, as well as help to make up for the sting of losing out on a recent auction.

In a bitter blow, Microsoft, Apple and RIM teamed up to outbid Google for a collection of patents from the communications company Nortel. Some experts speculate there may be more partnerships of mobile and software makers. Already, Nokia and Microsoft have teamed up.

But high-tech insiders are also closely watching Google's moves. If the company starts offering its Android software exclusively on Motorola handsets, it may leave other partners who use the system,, including Samsung, LG and HTC, "out in the dark", warns Ashish Panjabi, the chief operating officer for Jacky's Electronics in the UAE.


Published: August 17, 2011 04:00 AM


Most Read