The Google-Motorola sale caught me off guard, but like a lot of these things, I should have seen it coming. The signs were all there. I believe Samsung’s relationship with Google was the driving force behind the sale.
Here are a few giveaway facts from the past year…
- First, this whole thing probably goes back to Andy Rubin’s ouster, but I haven’t put the pieces together back that far. Rubin clearly wasn’t happy about the situation post Motorola buy but Google gave him a cushy job with his favorite robot pastime and a big wad of cash to spend on buying companies. It would appear that Rubin was probably for integrating Motorola into Google.
- Eric Schmidt spent a lot of time in Korea over the past year dancing with (and likely in high level talks with) Samsung’s leadership. On multiple occasions he said that Samsung was one of Google’s most important partners.
- Fast forward to recent. Seemingly out of nowhere, Samsung and Google announced a patent agreement where both companies would be sharing patents. The deal was lauded as an example of companies willing to share patents to innovate, not litigate.
- Samsung, it was reported this week, would be toning down its Touchwiz overlay, giving users a more vanilla Android OS that is popular with users, but wouldn’t allow Samsung to differentiate and steer its users toward a non-Android Tizan or Bada or other OS (Even Samsung’s Windows phones looked a little bit Touchwizy).
- There was also some speculation that the vanilla Android deal was a strong arm tactic by Google but now that doesn’t appear to be so.
- So… we’ve got a huge Samsung patent deal plus Samsung willing to give up on differentiating its OS. What does it get in return?
- Today we find out that Google is selling Motorola to Lenovo for $2.9B. That number is a shocking $10B below the price Google originally paid but there are lots of caveats here. Google sold $2.35B of the cablebox business to Arris shortly after the deal closed. The MOT purchase price also included almost $3B in cash, which you can just take right off the top line.
- On the other hand Motorola had been losing money every quarter it was part of Google, making it a drain on profits and bad PR in cost cutting and personnel cuts.
- All of this belies the incredible job CEO Dennis Woodside did. In a year he turned the product portfolio around and created two loved products, the Moto X and Moto G. These are two world class smartphones.
And this is the real tragedy. Google made something great. Moto had turned into a great hardware company that made some of its phones in the US and seemingly was on the way to profitability. Employees were jazzed. People loved their Moto phones. Everything seemed great.
Here’s what I think happened, though I have no proof or insight here.
Samsung was likely vocal about the Motorola acquisition, but was willing to play ball because of the perceived patent indemnification (which hasn’t turned out to be as valuable as originally thought). My theory is that Andy Rubin wanted to integrate Motorola into Google and forget about Samsung, HTC, LG and all of the Chinese manufacturers. Rubin pushed the leadership and made a “my way or the highway” type of threat to leave Android if Google couldn’t do Android hardware in-house.
Larry Page Google chooses to keep Android, eschews Rubin, firewalls off Motorola, and says that it is another company without Google badges. All’s well for the time being.
But then Motorola starts making some kick-ass phones and, more importantly, is able to upgrade them as fast as—if not faster than—even Nexus and Google Play Edition phones. People love them. Samsung realizes that Motorola is a few hit phones away from Google realizing it doesn’t need Samsung, so it makes a threat to move its >50% share of Android to Tizen, forked Android builds, Windows, or some other strategy.
Google, knowing it would be capitulating its lead in the smartphone race against an eager and resource-heavy Microsoft and an ever-strong Apple, bent (over) to Samsung’s whims, promised to sell off Motorola for almost nothing. In exchange, Samsung would start making its phones look less like Samsung phones and more like Android phones. In addition, both companies would share patents, including the ones it was keeping form the Motorola deal.
Now Google is no longer a phone maker and Samsung is firmly in the Android field. Android as a platform is as strong as ever with the assumption that Lenovo will also continue to make Android devices of its own as well as in its Motorola division.
But all of those folks at Motorola including CEO Dennis Woodside who survived the layoffs and made some great phones are now cast off into uncertainty. Lenovo says the Motorola brand will survive on in the Western hemisphere.
I wonder what HP would have paid.
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