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Secure Transactions News

Google adds Motorola 20,000-staffed hardware unit

Thursday 31 May 2012

Google’s proposed US$ 12.5 billion (EUR 9.9 billion) acquisition of Motorola Mobility has been approved by Chinese authorities, paving the way for full completion of the deal, reports Reuters. The deal was approved by US and European regulators in February 2012 (cf. SIW #12-08), meaning it has now passed all regulatory hurdles for it to take place. Google and Motorola have been waiting for approval from China for several months after the Chinese authorities extended an investigation into the acquisition (cf. SIW #12-13).

Google has appointed Dennis Woodside, who had overseen integration planning for the acquisition and previously served as president of Google’s Americas region, as new CEO. Sanjay Jha, who revived Motorola’s devices business and led the company through its acquisition as CEO, will continue to work with Google to help ensure a smooth transition.

Woodside has already assembled a senior team, which will be primarily based at Motorola’s offices in Sunnyvale, California, US, a few miles from the Googleplex. Mark Randall, who worked at on the Kindle, will lead supply chain and logistics. Gary Briggs, the Google executive who helped promote the Chrome browser, will take over marketing. Vanessa Wittman, formerly chief financial officer of Marsh & McLennan, will become CFO. A few Motorola veterans such as Iqbal Arshad, SVP in charge of hardware development, and lead designer Jim Wicks will stick around.

Eric Schmidt, Google’s chairman, also helped recruit some new talent: Regina Dugan, former head of the Defense Advanced Research Projects Agency (DARPA), will run a new Motorola research and development lab called the Advanced Technology and Projects Group (ATAP). ATAP will be modeled on DARPA: it will try to identify, invest in, and develop technologies that can be integrated into Motorola products.

Motorola, which has been reducing head count since 2008, now has about 20,000 employees compared with Google’s 32,000. Woodside didn’t comment as to whether he was planning job cuts at Motorola, though they appeared inevitable. He does say he’ll focus first on cutting products, not people.

Still, Chinese authorities did place one restriction on their approval of the deal: a requirement that Google keep its Android operating system free and open source for the next five years. This insures that Motorola’s competitors in China and elsewhere will maintain access to Android. Chinese handset vendors Huawei and ZTE are using Android smartphones to grow their share of the global handset market. Google will report to an independent monitor in China on its efforts to comply with terms of the deal approval, according to China’s Ministry of Commerce.

As of new corporate strategy, Woodside in Google’s press release announcing the close of the deal said: “Our aim is simple: to focus Motorola Mobility’s remarkable talent on fewer, bigger bets, and create wonderful devices that are used by people around the world.” This seems to indicate Motorola will not be churning out 9 million handsets per quarter in more than a dozen stock-keeping units (SKUs). Instead, Motorola’s engineering talent will focus on ways to improve Android. In other words, despite Andy Rubin’s, VP of engineering at Google, talk of a “firewall” between Motorola and Android, Motorola would become a de facto Android development organ.

Some analysts believe that though widespread adoption of Android is of course positive for Google, but down the road this restriction could make it harder for Google to manage the Android ecosystem. As various manufacturers customize Android for their devices, they make it harder for application developers to create software that will be compatible with different Android devices. Without the ability to license Android, Google has less control over the proliferation of “forked Android” OS.

However, Google will also be challenged in that it will not want to anger its numerous OEM partners that currently provide dozens of smartphones running the Android OS. Google seems to be keeping this challenge in mind with its close relationship with Samsung to produce its Nexus device that is seen as having the most “pure” version of the Android OS.

The ruling that Google could not “discriminate” against Android OEMs is unclear in terms of how this will affect Google’s distribution of Android source code to certain device makers earlier than others as part of its Nexus program. The Wall Street Journal recently reported that Google plans to give multiple Android device vendors early access to the next version of its OS as it expands its Nexus device program and tries to husband more control over the devices from carriers. The report also noted that the expansion of the Nexus program is being done to temper the concerns of other OEMs that Google might favor Motorola.

But would Android OEMs accept entreaties from Google? They’re already paying Microsoft an effective tax on patent licensing. Most of them have margins that are thin or nonexistent. “It’s certainly likely other manufacturers will need to weigh and balance moving forward with a Nexus brand as opposed to an exclusive brand” of their own, said Informa Telecoms & Media analyst Andy Castonguay.

Interestingly, according to Bloomberg Google also recently acquired the industrial design firm, Mike and Maaike, that worked on the first Google Nexus phone. The acquisition is a possible indication that Google plans to invest further in its new hardware business.

At the same time, the merger, first announced in August 2011, allows Google to secure valuable patents held by Motorola and combine the Android OS with Motorola devices. Android is the most widely used smartphone OS and Google is hoping Motorola’s patents, of which there are 17,000, will boost its efforts to compete with Apple and protect other Android phone makers from patent litigation (cf. SIW #12-05).

Earlier this month Motorola Mobility posted a loss of US$ 86 million (EUR 69 million) in its first-quarter earnings for 2012. The loss is US$ 5 million (EUR 4 million) deeper than the US$ 81 million (EUR 65 million) loss the company made in the same quarter last year (cf. SIW #12-19).