Google and Motorola

As has been extensively reported, Google is selling Motorola, less than two years after it bought it, for $3 billion after buying it for $12.5 billion.

Yglesias makes the point that this is less of a terrible deal for Google than it sounds at first blush:

On its face that’s a ~$9 billion price for some of Motorola’s patents, which looks terrible. But Google sold Motorola’s set-top box division already for ~$2.3 billion, and also acquired about $3 billion in cash when it acquired Motorola. So on net it’s more like they come away about $5 billion poorer and in exchange get the patents. Not a great deal but not a terrible one.

I’ll go further and say it’s a terrible deal but not the catastrophic one that it sounded like.

But two points on this:

First, to whatever extent it is true that Google values Motorola’s patents at billions of dollars, this is a failure of our patent law.  Motorola’s patent portfolio includes, at a rough estimate, $0 in patents that actually are socially enhancing for anyone to own.  If Motorola’s fair market value for its patents are about $3 billion, let’s say, that $3 billion is basically just wealth transfer from other companies to Google (with a healthy percentage diverted into law firms), and it’s at best unclear that if Motorola had been unable to patent those technologies, it would have done a single bit less R&D or innovation.  Destroying these patents wouldn’t destroy wealth, it would create it.

Second, honestly the patents thing is a bit of face saving.  Google took a bath on Motorola any way you look at it.  And while that may be because they looked into Motorola and said, “Holy shit, this thing isn’t worth saving,” I don’t think it was.  They didn’t really have time to make a go of trying to rescue Motorola’s handset division and fail at it.  I think they sold Motorola due to pressure from Samsung.

Samsung was deeply unhappy to have Google directly competing with their handsets, and Google had to make lots of placatory promises to not unfairly advantage Motorola in terms of producing Android devices.  But it looks like those weren’t enough.

The thing is, Samsung’s dialect of Android is awful, and their devices are kind of awful too.   They’re incoherent, feature-jammed devices, and if the balance of power in Android is swinging towards Samsung over Google, that suggests some bad things about the future of Android.  If you look at the best-reviewed Android devices of the last two years, basically none of them are Samsung.  The Motorola X-Phone got pretty good reviews.  The HTC1 got fantastic reviews.  Every Nexus device got fantastic reviews.  The Galaxy S3/4 and the Note got… decent reviews.

But Samsung outsells all of those other devices put together, with grace and ease.  So…  yeah.  It’s hard to tell how much the balance of power has truly shifted.  But it would be nice to see Samsung forced to scale back TouchWiz and hire some decent designers to compete with genuine threats from the Android side.


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s