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Motorola is Dead! Buried by Google
I was roaming a small market in Hong Kong chatting with friends about recent developments in the phones market. In the dusk shop windows looked especially bright and streets were still crowded. One hour after we were in a convenient restaurant offering a majestic view of the city when I got a message with the official Motorola press release link and an entry in the Google blog. The company, which invented the mobile phone and created the appropriate market was pronounced dead. All things must pass and new generations of devices and people appeared since the days of StarTac. Our world has changed and it has no place for Motorola phones now.
You can look at the graphs showing sales of models and remember how the company was split into two parts and Motorola Mobility was left without the infrastructure, while trying to attract customers with new handsets. It makes no sense though!
This article is far from ideal analysis of the situation, because we need emotions among the myriad of facts and figures. Browsing various resources, reviews, press releases and feedback I did not read that Motorola is dead, which is the main fact. Desperate attempts to survive ended up well under the circumstances for Motorola shareholders as it is snapped by Google for $12.5 billions. The premium is 63% in comparison with the market price. More importantly Motorola phones will disappear soon. The outcome was clear when sales plunged after the RAZR boom. Someone saw growth in the budget segment, but it was more connected with the interpretation of figures rather than with actual sales and viable strategy. Figures detached from the market situation could fool somebody, but it was futile and offered no future for the company and rivals knew about it. The question was when Sony Ericsson and Motorola would leave the market. Motorola turned out to be first to surrender.
There is no need for pathetic drama here! The majority of customers will not feel the change in every day life. Loyalty and impressive products were left in the past. Why Motorola phones will disappear soon? The answer is in the rationale behind the acquisition by Google and its plans.
In the middle of 2011 the patent war was started between Apple, Microsoft and Google. Without cooperation Apple and Microsoft attacked Google and tried to interfere with the search giant as much as they could. Apple strategy targets Google partners, which use Android. Recently it managed to get a temporary ban on Samsung tablets in Europe and Australia. There are no direct complaints towards Google, but Apple capitalizes on patent gaps in Google portfolio, which is smart. By winning these cases Apple will not only earn money on their own patents, but will scare many partners from Google. The plans are quite ambitious. Microsoft is not so direct, but they are doing something similar. Google responded with the official statement citing unfair competition, pressure and other things. When you hear such announcements it means that the company has a problem on its hands. In 2011 the key priority for Google is the safety of its Android partners. In the race for Nortel patents (eventually sold for $4.5 billion) Google lost to main rivals and needed to boost its patents portfolio. Motorola Mobility gives such assets. There are 17,000 general patents and 7,500 patents for applications. The deal should protect Android, as Google has no future plans for the Motorola brand.
One of the first questions is the reaction of HTC, Samsung, Sony Ericsson, LG, which products promote Android and contribute to its popularity. Google was free to mention that Motorola will not get any special preferences and the whole transaction was made to protect the Android community. In plain English it means that Google has no plans to manufacture phones. By solving the topical issue Google did not think about future implications. At the moment Google employs around 24,000 employees, while Motorola has 19,000. Many people sell Motorola products, so they are absolutely redundant for Google. We should not be surprised that the latter will start shedding staff of Motorola. Google cannot create a rival for its partners, but Motorola will still exist in the US and market some models. There will be no any long-term strategy, but just an attempt to squeeze extra profits from the niche.
This transaction is the most expensive purchase of an R&D center in the history of the mobile phones. Google gets the machine to generate patents and not to manufacture phones. The search engine needs engineers to move Android further and create technical solution associated with OS features. Android will suddenly get a reference design of software and hardware features. This is the main difference between Google and Apple, which creates everything in-house from hardware to software. Google never had this option, but it will appear now. Microsoft has no engineers as well and is left inventing software features, which incidentally are its strongest point. The key for success now is an opportunity to combine software with hardware.
Google does not need to produce phones. It will not be successful in the area as we know from the Nexus experience, which remained the reference device for many developers. Now such devices will be launched by Motorola and everybody will be happy. Manufacturing and sales of phones have high risks, so Google will not jump into hot water itself, but will seek partners. That is why Motorola is dead, because Google needs patents, not facilities to manufacture handsets.
I do not feel any nostalgia, because I said good bye to the company more than a year ago, when it was clear that its days were numbered. Sony Ericsson has no chances as well and its disappearance is the question of time. Times are changing and these companies have no place in the market. Even Nokia, which seemed invincible several years ago is going down.
In the majority of countries you cannot buy Motorola phones now. Soon they will disappear completely and we will forget about the brand. Google buries Motorola and gets its patents. Motorola as we knew it before came to an end.
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Published 19 August 2011
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