What the conventional wisdom about Google's Motorola deal doesn't tell you

What the conventional wisdom about Google's Motorola deal doesn't tell you

Business Insider’s Editor-in-Chief, Henry Blodget, doubts that Google’s deal to take over Motorola Mobility will succeed for the search giant. In my view, Blodget, like other critics of this deal,  is almost all wrong on why the deal could be bad for Google.

Blodget states that “the deal creates major channel conflict: Google is now competing with its partners.” This is true, but Google’s hardware partners cannot really do anything to stop Google from competing with them. Apple does not allow anyone to develop its iOS operating system as Google allows its Android system to be modified. Sure, Google’s hardware partners, Samsung, HTC, LG, and others, could try to make their own forks of Android specifically for their devices, much like iOS, but Google owns the Android name in people’s minds and so it would be hard to sell a phone as HTC Android or LG Android. In fact, if the handset makers were to attempt such a move there is no guarantee they could even use the name Android as the flagship name for their potential product. Additionally, they would risk pulling themselves into the raging patent war.

I am not denying that Google is “is stabbing [its partners] in the back.” It is. However, sometimes a little murder is how one moves up in the royal palace hierarchy, which in this case is the mobile phone industry.

Google’s hardware partners could dump Android en masse, but they could risk their customers switching to alternative Android platforms, like ones built by Motorola. Android fans might not mind waiting out a few months on a below average Android on Motorola platform if it means a huge upgrade in the near future. In addition, where would HTC and others go? Windows Mobile? I doubt it. They would have to develop or manufacture a completely bigger slate of phones on that platform—and hope they sell.

Blodget also wonders whether this is “an acknowledgment that, in smartphones, Apple's integrated hardware-software solution is superior to the PC model of a common software platform crossing all hardware providers?” The answer to that question is yes and no. Yes, I believe that Google sees the Android platform as too fragmented. However, the extremely homogenous likes of Apple are not necessarily a good thing for Google or the Android platform. Everything is basically the same for Apple, save for some hardware changes between handset models. This size and shape are basically the same for all purposes. Almost like fraternal twins that look like identicals. The devil is in the details for Apple’s handsets.

Such a system helps developers for iOS. They know exactly what they’re working with and there are no wildcards ever thrown in. However, having basically two models of iOS (phone and tablet) is not good for Google nor is it good for Android. Being the mostly open source platform that it is, Android can become a lot more versatile a lot easier than Apple can. This means Google and Android developers could basically try to boil down Android to phones and tablets with subgroups. There could be big, iPad like tablets. Then there could be smaller tablets, that serve the gap between business, pleasure, and productivity. As for phones, there could basically be smaller phones, medium-sized phones, and large phones. Additionally the phones and tablets could be with or without virtual keyboards. Sure, the non-virtual keyboard may be going the way of the dodo bird, but it is a long way from dead and still offers significant functionality for users.

Developers for the Android have to deal with a wide variety of models for phones and tablets. This does not make developing applications easy. In fact, it means developers may have to make many esoteric tweaks deep in code to satisfy most devices, or risk aliening a huge segment of handset users. So, yes, Google needs to lasso in the almost endless variety of Android handsets, but Blodget is totally off base to argue that Apple’s integrated solution is hands-down superior.

Blodget goes on to argue that this is purely a defensive move by Google to gain a bunch of patents in the software patent wars. If the best defense is a good offense then Google has just doubled up on both. It has gained an enormous amount of intellectual property while gaining tremendous leverage advantage in the mobile hardware market. Google’s other hardware partners may be extremely upset, but the realistic view is that they have nowhere to go. Google can now dictate terms to cut down some of the swamp of Android handsets. I would label that action as pretty damn aggressive.

Finally, Blodget goes after Google’s stock. Sure, analysts may not immediately like this deal for Google. But then again, the quick thinking looks bad. Looking closely at the long-term effects of this deal as well as all the leverage Google gains, Google seems like a good bet to earn a decent return on this investment. Let’s remember that the conventional wisdom looked bad on Apple in the 1990s and great for Enron and Lehman Brothers right before they cratered into oblivion.

Blodget rightly notes that Google is not in the hardware manufacture business, which it will have to be now, but Blodget is discounting the fact that Google probably has thousands of hardware geniuses inside its complexes who are testing for Android, testing for Chromebook, and seeing what things work best. Google’s test will be whether it can manage such a large, permanent hardware infrastructure, not whether it is up for the challenge. Blodget is discounting the fact that Google is ready and willing to step up and diversify beyond its web products and Android. That is risk. That is investment. Those things lead to growth when executed well. Who the hell would have thought searching for gifs and Wikipedia pages would be a profitable business in 1998?

One area where I completely agree with Blodget is when he notes that Google may have a tough time integrating 19,000 employees into its current force of 29,000. Blodget notes that “culture is crucial” at Google. He is right. However, Motorola Mobility was going nowhere and its employees must be happy to have been given a new lease on life in the mobile market. They will be happy. The only question will be whether current Googlers accept them.

This deal is a gamble for Google, but one in which I believe the odds are looking good for Google.

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