Google characterized it as "Supercharging Android." Whether you subscribe to that characterization of Google's takeover bid for Motorola Mobility may depend upon which end of the Android ecosystem you're standing on. One of the factors that made Android such a strong challenger to Apple's iOS is its open and diverse distribution model. Regardless of the outcome of Google's bid, that model will change.
How much more likely are developers and partners to support Android next week than last week, now that they know Google is positioning Motorola to be the system's premium brand? What does Google gain from being a serious (read: "forget the Nexus One") manufacturer of Android over and above what it would have gained just as a promoter? And what does this move mean for Android supporters who had intentions to move the system beyond mere smartphones? ReadWriteWeb posed these and other questions to NPD Group Executive Director for Industry Analysis Ross Rubin on Thursday.
ReadWriteWeb: Since Monday, I think a lot of the regular old analysts have gotten together into one big pool, and they've all decided to agree on the idea that the whole reason behind Google's bid for Motorola Mobility was so they could have MMI's patent portfolio. Is there any contrarian view to that at all? By process of deduction, could we ask ourselves, "What does a software company see in owning a manufacturing firm?"
Ross Rubin: Well, I think it's interesting that you consider Google a software company. The question is how the pieces come together, and if the pieces come together. Google wanted to move quickly to access this patent portfolio, and perhaps it may not have been keenly interested in the hardware business per se, but given the time pressure to put the deal together, it may not have been able to find a buyer for that part of Motorola in time. So it took the whole company instead of just the patents.
RWW: So you see a scenario where they tried to find a partner, said, "We'll go in this together, you get the manufacturer and we'll take the IP assets," and everybody else said, "No, you kidding? You take the icing and we take the crummy old cake?"
Rubin: It does raise the issue that Motorola has been challenged to differentiate in the smartphone era. When it released its first Android device, a key part of its strategy was MotoBLUR. Over time, there has been more resistance to it, and Motorola has scaled it back. The very nature of it has become somewhat amorphous, and so Motorola really doesn't have the investment in software and visual differentiation that HTC has made, and it doesn't have the deep ties to the component supply chain that Samsung has. So among its two chief rivals in the Android market, it's been somewhat challenged to differentiate.
RWW: Well, I know that Motorola boasts of having something like 17,000 items in its patent portfolio, maybe a handful of which are the real jewels in the crown. As far as what financial analysts perceive, in the past couple of days they've been looking at the goings-on in the Microsoft v. Motorola battle with the International Trade Commission, and they're seeing the possibility that the five patents that the whole thing is about might not be as valuable going down the road, especially if Microsoft succeeds in demonstrating their invalidity. So if that happens, I don't see the 17,000 being material. It may as well be 17 million. It's not enough to float the boat any more, and I'm wondering if maybe $12.5 billion is overpaying [for Google].
Rubin: It's very difficult to determine in advance of litigation which patents will be the key ones. Certainly Motorola played a foundational role in the development of cell phones and cellular networks. It was widely viewed as having a valuable war chest of intellectual property that could be used to attack Android if Microsoft had acquired Motorola. And indeed, Motorola itself had been talking about potential litigation against other Android handset makers. Or, [Motorola's patents] could be used to defend Android, in a Cold War-style, Mutually-Assured Destruction scenario. The reaction to the acquisition was really focused on that scenario, with Google leading up to the acquisition by noting that Android was being attacked, and it needed to defend and protect Android. To the extent there is a silver lining for the other Android licensees, that's what it is.
RWW: So in your scenario, we cast Ronald Reagan in the role of Google, and Motorola's patent portfolio is the Strategic Defense Initiative.
Rubin: Yes, Google acquired one for the Gipper.
RWW: We talked about this a couple of years ago with respect to a completely different set of companies, when Microsoft first started differentiating Windows Phone 7 from Windows Mobile, and we talked about the possibility of bifurcation in the platform and how that might not be perceived as a really great thing for developers. In this situation, where Google ends up owning the manufacturer that's probably contributed at least 50%, maybe more, to the Droid brand, I would think as a developer, I would be afraid of a similar bifurcation. Suppose there's an Android Market platform, if you will, and a Droid platform where you have tighter controls and more of a walled garden, iPhone-ish scenario. That might make me a little wary about wanting to develop just for Android... or for the two Androids.
Rubin: This is interesting... The Droid brand is not a Motorola brand, but a Verizon brand, or rather a Lucasfilm trademark that Verizon has licensed. It does have an association with high-end devices. There could be some benefits to Google saying, "You're free to create virtually whatever you want with Android on some level, because without the Google properties, it's open source." But we're going to identify classes of devices that apps can be certified against, so that developers have clearer targets. I wouldn't say Google has done something similar, but it has taken steps to try to bring various devices up to the latest version of the operating system, via the announcement at Google I/O that it would be working with a large percentage, if not the entire, Open Handset Alliance in the U.S. to create assurances about upgrades.
There's two causes of so-called fragmentation in Android. One is the variation in the hardware - different screen sizes, different processors, different graphics chips, etc. The other is manufacturers shipping new devices with versions of operating systems, and uncertainty regarding when or if they will be upgraded.
The idea behind this effort is to try to assure consumers that devices that can be upgraded, will be upgraded on a better-understood timetable. It certainly does not achieve the idea of bringing everything up to a certain level or bar in terms of a developer target, but at least it helps bring a greater percentage of devices entering the market to as up-to-date a version of Android as those devices can accommodate.
Literally minutes after we disconnected with Ross Rubin, Hewlett-Packard sent out its ominous revenue warning and announced it would not only be discontinuing the manufacture of webOS-based devices, but is considering selling off its Personal Systems Group (the PC division). So we sent Rubin this follow-up question:
RWW: I find it interesting that HP is getting out of the device manufacturing business at the same time Google is getting into it. Is HP thinking there's more revenue to be gained from licensing than manufacturing, especially if it's not the target of patent suits, so perhaps it wants to position webOS as the new standard bearer for "Open" (taking Android's place)?
Rubin: It seems that HP hasn't decided exactly what it is doing with webOS yet. The decision to exit the webOS device business was driven by the financial strain of trying to leverage webOS across a wide swath of products amidst poor performance and a strategic shift away from the notion that being in the client computing space helps serves as a conduit for enterprise software and services.
Coming up on Sunday: Part 2 of our discussion with Ross Rubin, where we ask whether the Grand Vision that Google had in mind for Android must be put on hold pending decisions from regulators.