Friday, February 14, 2014
Value of Intelligence
Apparently, Motorola brought to Google $3.5 Billion in value. Although Google bought Motorola for $12.5 Billion and sold it for $3 Billion, after evaluating its cash no hand, deferred assets, price Lenova purchased it for, and etc. Google's value of Motorola's patent is smaller Apple and Microsoft's purchase of $4.5 Billion of Nortel. Acquiring over 20,000 patents, Google stated that it would not compromise relationships with its current handset partners (Samsung included). In actuality, Google's prime motivation of the acquisition has been to keep its partner, Samsung, in line. Recently, with 81% of Samsung's device being run by Android, Samsung has started to switch out components of the Android system. After the patents acquisition, the new Galaxy S5 indicated that Android's design weren't kicked out and hidden with Samsung's own apps. Secondly, with Samsung expressing a desire to switch to Tizen as its handset operating system, the purchase of Motorola has now allowed Google more leverage. It can indicate to its partner that it also has the capability of moving the Android system to its own devices (an easier switch than switching operating systems). Therefore, although it was scrutinized at first, the purchase of Motorola actually was an insurance policy for Google's growth in the mobile phone industry.
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I definitely agree that the purchase of Motorola by Google had a lot of fiscal prudence behind it. Google acquired the existing money on the balance sheet, sold off parts of Motorola, and then acquired the patents. This buffered both their mobile technology markets as well as gave them the force to threaten both Apple and Microsoft. I believe Samsung was getting quite irritated with Google and definitely used Tizen as a way to show Google that they weren't reliant on their technology. Google's protection of Android seems paramount to the company's success. I think evaluating the company decision to acquire more patents at a cheaper cost than the patents Apple and Microsoft received shows the prudence of Google. They understand the long term patent wars that are playing out and will do whatever it takes to win that battle.
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