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12/11/2012
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Eric Zeman
Eric Zeman
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Google's Motorola Acquisition: All About The Patents

Slew of facility closures and divestitures prove that Google was never interested in Motorola's hardware business.

"I'm confident the team at Motorola will be creating the next generation of mobile devices that will improve lives for years to come."

Those are the words of Google CEO Larry Page, which he wrote when the company closed its acquisition of Motorola Mobility in May of this year. The acquisition was valued at $12.5 billion.

"Creating" is an interesting choice of words. Motorola certainly won't be manufacturing many more smartphones, thanks to Google's recent sales of Motorola's manufacturing facilities. The company announced today that it has sold two manufacturing plants -- one in Tianjin, China, and the other in Jaguariuna, Brazil -- to ODM Flextronics.

Further, on Monday Google announced plans to shutter a Motorola research and design facility located in Korea. Google also plans to close Motorola's marketing and sales organization in Korea, and effectively exit the market. Korea is home to Samsung and LG, which hold a significant portion of the country's market share for mobile devices. Google didn't say it couldn't compete in Korea. Rather, it wants to save costs. The facility closures will mean about 500 jobs can be eliminated.

[ Will Google continue to develop apps for RIM's beleaguered device? See What If Google Ignores Blackberry 10? ]

Last, Motorola is shutting down a manufacturing facility in Chennai, India. The operation there is small; only 76 people will lose jobs. It is used to install software on mobile devices, as well as prepare packaging. The facility will be idled in February of next year.

These sales and closures shouldn't be a surprise to anyone. In fact, Google warned in October that it was exiting the entry-level device business and that more facilities would get the ax before the end of the year.

Google was never really interested in Motorola's hardware business. It even said so.

John Lagerling, Google director of Android business development, said earlier this year in an interview with the New York Times, "It's mostly about the patents, [that] way you can sort of disarm this huge attack against Android." Lagerling was, of course, referencing Apple's patent-related assault of hardware manufacturers that make Android smartphones.

So what will become of Motorola's hardware business? Well, it's not going to go away entirely. Google has committed to making high-end smartphones. Google may have consolidated Motorola's offices and facilities in the U.S. and abroad, but the company still calls Chicago home and will continue to design devices for U.S. wireless network operators.

As part of its deal with Google, Flextronics signed a contract with Google to manufacture mobile devices for its Motorola subsidiary. In other words, the same plants that made Motorola phones this year will make them next year, but under different ownership.

Google is simply reducing Motorola's manufacturing footprint and business operations -- it's a software company, after all -- and will hold onto those 17,000+ patents for protection when it needs them.

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melgross
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melgross,
User Rank: Ninja
12/12/2012 | 4:27:18 PM
re: Google's Motorola Acquisition: All About The Patents
Considering that Motorola's sales continue to plummet, it's no surprise that Google is cutting back. Sales in S. Korea are almost nonexistent. The cost to maintain the sales there must be more than the sales themselves, so again, not a surprise.

None of this means that Google doesn't want to manufacturer phones, just that they made a vary bad decision in buying Motorola in the first place. The $12.5 billion they paid for the company was almost twice the value of the company the day the purchase was announced. No matter how effective the patents might have been, and they have not been all that effective against Apple, or Microsoft, the other company they've been fighting (no, it's NOT all about Apple), their value was never more than a fraction of what they paid for the company.

At some time, I expect them to write most of it off.
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