Google's Acquisition of Motorola Mobility: Will the 'Gamble' Pay Off?

            
 
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Case Details:

Case Code : BSTR420
Case Length : 21 Pages
Period : 2010-2011
Pub Date : 2013
Teaching Note :Available
Organization : Google Inc., Motorola Mobility Holdings Inc.
Industry : Mobile devices, Information Technology
Countries : USA

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Excerpts

About Motorola Mobility

Motorola Mobility was formed when the erstwhile Motorola Inc. (Motorola) was split into two companies in January 2011. The other Company was Motorola Solutions Inc. Motorola began as Galvin Manufacturing Corporation in 1928. The company introduced an automobile radio in 1930, which was named Motorola. Subsequently the company adopted the name. Motorola went on to introduce products like car radios; portable two-way radios, which were used extensively during the Second World War; televisions; vehicular two-way radios; pocket radios; pagers; DynaTAC, the world's first commercial handheld cellular phone; and the MicroTAC personal cellular phone, among others...

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The Battle for Supremacy

After the launch of Android, Google released its new versions rapidly, adding several new features. As Google licensed the Android operating system free of cost, it found widespread adoption by handset manufacturers like Motorola, LG Electronics (LG) , and Samsung, apart from HTC. Google's flagship smartphone, the Nexus One, was released in January 2010. The Nexus S was developed in association with Samsung and launched in December 2010...

Google Acquires Motorola Mobility

On August 15, 2011, Google announced its acquisition of Motorola Mobility. After the acquisition, the shares of Motorola Mobility soared by over 60% to US$ 39.24, while Google's shares were down 3.2% to US$ 546.50.

Through the acquisition, Google got hold of a number of patents. This was four times the patents owned by Nortel. Analysts said that there was a huge demand for intellectual property, especially in mobile devices, and Google would benefit immensely from the acquisition. According to Alkesh Shah, Analyst, Evercore Partners , "The big thing it plugs for Google is: Google's patent portfolio is only a few thousand, and they have been the target of a significant amount of patent litigation. Motorola's patent portfolio provides a very strong defense against all this litigation."...

The Future of Android Partners

Google's announcement that it planned to run Motorola Mobility as a separate business, which would continue to be a licensee of Android, was welcomed by the Android partners. JK Shin, President of Samsung Mobile's global operations, said, "We welcome today's news, which demonstrates Google's deep commitment to defending Android, its partners, and the ecosystem." Similar views were echoed by LG and HTC...

Is The Acquisition a Gamble?

The acquisition did not give Google the much needed hold in the tablet market, as all the Android partners put together could not surpass the iPad's share. In the second quarter of 2011, the iPad's market share was 68.3% as against 65.7% during the previous quarter. The share of Android tablets fell to 26.8% from 34% during the same period. Google needed a presence in the arena as the market for tablets was projected to grow to 63.19 million units for 2011 from 19.7 million units in 2010...

Exhibits

Exhibit I: Google - Major Acquisitions
Exhibit II: About Android
Exhibit III: Mobile Operating Systems
Exhibit IV: Patent Lawsuits
Exhibit V: Motorola Mobility Financial Statements
Exhibit VI: Google Statement of Income


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