Google's Acquisition of Motorola: Software, Hardware, Everywhere
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Case Code : BSTR401
Case Length : 18 Pages
Period : 2010-2011
Pub Date : 2012
Teaching Note :Not Available
Organization : Google, Inc.; Motorola Mobility Holdings, Inc.
Industry : Smartphones; Information Technology
Countries : Global
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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.
Google owed its origins to a Stanford University project undertaken by two students, Larry Page and Sergey Brin, in 1996. Google's search engine was launched in 1998. At the time the prevailing search engines delivered search results based on the frequency of keyword occurrence. This often produced irrelevant results. Google, however, employed an algorithm called PageRank that ranked web pages based on the number of inbound links to them from other websites. This resulted in more relevant search results. The superior search results, combined with faster processing due to Google's generous spendingii on hardware infrastructure like data centers and servers, resulted in Google achieving the leadership position in the search segment.
By 2006, Google had captured a share of 43.7% of the US online search market. Google filed for an IPO in April 2004 and subsequently went public in August 2004. The company followed a dual share structure. Google’s IPO comprised only subscription to Class A shares, each of which enjoyed a single vote. Google's founders, venture capitalists, and other insiders were separately allotted Class B shares which were entitled to 10 votes per share. Google's founders justified this share structure on the grounds that it would help them execute the long-term plan that they had chalked out for the company without being hindered by the immediate financial demands.
Many of Google's blockbuster products had evolved from its acquisitions. Over the years, Google had branched out into different segments such as hosting services like YouTube and Google Maps, e-mail and chat, enterprise services like Google Docs and Cloud computing, social networking platforms like Orkut and Google+, and, mobile device design and sales (Nexus One). As of November 2011, 91.1% of the global search share belonged to Google. For the year ended December 31, 2010, Google clocked revenue of US$29.3 billion and a net income of US$8.5 billion. Its cash and cash equivalents amounted to US$13.63 billion. The principal revenue earner for Google was the paid ad service that it provided. Google's advertisement services could be subdivided into two models, AdWords and AdSense. Under the AdWords model, advertisements were displayed along with the search results. AdSense was a technology that enabled the display of text or picture ads on web pages based on their content.
As of 2011, Google's main business segments were search, advertising, operating systems and platforms, and enterprise services. Google had a corporate philosophy which, it claimed, guided the company's actions at all times. One of the tenets of this philosophy was that Google's principal focus was on the search business as this was what it believed it was good at and which it was confident of bettering constantly. It also claimed that this single-minded focus helped it overcome serious bottlenecks and made its search services all-encompassing.
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