By Sam Liu
Last week, Google announced that it is buying Motorola Mobility for $12.5 billion (US). Then HP announced that it is exiting the PC business leaving the future of its webOS in doubt. With all of this unfolding, here are five questions that immediately came to my mind:
1. What will Google’s acquisition of Motorola mean to the smartphone and tablet market?
This has got to be scary for the device manufacturers especially those based on Android. They have to wonder now with Google in the picture and with its considerable resources, how are they going to compete and differentiate themselves against Google/Motorola devices as well as Apple’s iPad?Though not completely the same analogy, can you imagine if Microsoft purchased a PC manufacturer back in the 1980s?
2. What does the Google-Motorola deal mean for Research In Motion (RIM)? Are we in for more consolidation?
RIM is already in trouble and has been losing market share fast in the handset market so the Google-Motorola deal can’t help that. In terms of other acquisitions, there is noise out there that Microsoft might be interested in RIM and the patents that the BlackBerry maker possesses but I don’t think Microsoft will bother. However, with Nokia shifting its platform strategy to Windows Phone, one may wonder if Microsoft might buy Nokia. But then again, being hardware agnostics could be a good strategy for Microsoft.
3. What importance do patents play in all this?
Too early to tell, but when a company buys another company, it is usually either for its market share or for its technology (i.e. their patents). In the case of Motorola, the company has a combination of both. It has a sizeable market even though it has shrunk over the years but Motorola still has a large customer base. Getting control of the install base, the market share, and technology patents will only give Google a leg-up against other vendors.
4. What are the longer-term consequences of this acquisition in terms of the mobile OS space?
It is hard to say because you have one camp that delivers vertically-integrated solutions like Apple — meaning it built the hardware and the software and virtually all the channels to market. Then there are vendors like Microsoft that simply build the platform software and license it out to the hardware manufacturers. Google is now somewhere in between, and Android is somewhat of an open source platform.
It is almost like we are back in the days of the PC with Microsoft licensing its software to PC manufactures and Apple developing the hardware and software on its own. Apple lost that battle initially, but has seen a resurgence using the vertically-integrated approach for its phones and tablets, so we can clearly see that both strategies work.
5. Who will be the winners and losers in the mobile space due to consolidation?
The biggest loser will be RIM as it will get left further behind. Others that should be concerned are Android device manufactures — they need to differentiate more than ever. Microsoft is in an interesting position; it may end up as the neutral party to convince more manufacturers to adopt their platform, assuming it doesn’t go purchase one.
In light of recent events, what do you anticipate will unfold in the mobile space?