Almost two years ago, Google spent more than $12 billion to buy Motorola. At the time, and even now, it was seen as both a patent grab and a way for the search giant to eventually enter the hardware market with its own Google-branded phones. The Motorola X Phone certainly draws a lot of attention as rumors spin across the Internet, but recent developments are making the purchase seem less and less clever.
In a legal dispute with Microsoft over royalties concerning Wi-Fi and video encoding, Google/Motorola demanded that Redmond pay about $4 billion every year. That's a truckload of money, and might have made the purchase worth the cost whether the alleged Motorola X Phone comes out this year or never.
Turns out, though, those patents Google wanted control over aren't worth anywhere near as much as it expected. The judge ruling on the case decided that Microsoft only owes Google/Motorola about $1.8 million a year. That's still more than Microsoft believed it should pay, but if you're Google the whole situation must feel something like walking into the Cave of Wonders and watching the entire fortune melt and burn away in front of you the moment you try to take a single coin.
Here's the patent situation summed up nicely by The Verge's Nilay Patel:
"With the value of Motorola's patents now coming into focus, the complete implosion of a previous suit against Apple, and increasing domestic and international pressure against using standards-related patents to block competitive products, it's not unreasonable to say that any patent-related benefits to the purchase have vanished," he wrote. "Google may have wanted to buy a bulwark against future Apple lawsuits, but it ended up with a fairly anemic patent-licensing business instead."
So now, two years in, Motorola is still bleeding money, has cut about 25 percent of its work force (more than 5,000 layoffs since August), the company's backlog of devices isn't "wow" worthy, and its patents are of virtually no use in the larger litigation wars.
As Motorola X Phone rumors swirl about specs and features, one has to wonder exactly how much of a difference the device will make even if it is a quality piece of handiwork. As we've mentioned a couple of times in the last week, every phone maker offers a high-end, quality hand set. If innovation in the mobile space is sputtering, then the Motorola X Phone is going to need more than high-end specs and a nice build to take the world by storm. But it might still be necessary anyway.
According to Patel, "entering a full-throated competition with Android market leader Samsung might further impact a relationship that's already seeing the Korean company relegate Google's operating system to second place behind a thick veneer of Samsung software and services. Samsung dominates the mobile market in a way that no other company save Apple has managed to achieve - there's no apparent reason Google would risk severing that relationship just to enter a cutthroat hardware business that requires equally complex carrier relationships simply for the sake of it."
While this is true, the answer to the question of "Why did Google buy Motorola?" might actually be in Patel's own risk assessment. Alienating Samsung, the dominant Android phone maker, wouldn't be ideal, but the company is already distancing itself from Android anyway. If Google doesn't act, it might simply find itself out of luck when its biggest partner simply decides to move on permanently.
The new Galaxy S4 has so many new Samsung-specific apps thrown into it under the guise of the company's own TouchWiz interface that some might even be surprised the thing runs on Android. We already know the South Korean giant is building its own operating system dubbed Tizen (with possible plans to release it on a phone this year), and the trajectory seems clear. Samsung is a huge, popular global brand now, and the more it can unify operations under its own roof while still being successful the better off it will be. That doesn't leave much of a home for Google and Android going forward.
Samsung's dominance wasn't a foregone conclusion when Motorola was initially purchased, but despite the huge amount of money poured into it, opportunity can still knock. Google CEO Larry Page said back in January that companies need to sink cash into moon shots or risk becoming obsolete.
"If you're not doing some things that are crazy, then you're doing the wrong things," he said.
Google better hope he's right, because the longer Motorola gasps and stammers, "crazy" seems increasingly like the only word left to utter.
