Motorola Takeover: Google Pays Protection Money Amounting to Billions

The company chisels out the largest takeover in its history with the purchase of Motorola. Doing so has little to do with cell phones. The more than $12 billion serves to protect Google’s cell phone operating system, Android.

More than 50 legal actions on account of alleged patent violations are under way against Android. Google itself accuses competitors like Microsoft, Oracle and Apple of waging a hostile campaign against the web search company. The goal of the rivals is to slow down the rapid proliferation of the Android system and to hinder Google from expanding its market power on the mobile Internet, because in the future, most people will access the Internet via mobile devices like tablets or cell phones.

Therefore, a large portion of the future growth prospects for Google — as well as Microsoft, Nokia and Apple — depends on the prevalence of their respective proprietary cell phone operating systems like iOS from Apple or Windows Phone 7 from Microsoft.

The mobile communications veteran Motorola accumulated patents for decades. According to company information, they currently hold over 17,000. A further 7,500 have been applied for. This strong portfolio will be useful to Google in future negotiations with its rivals. The patent arsenal will provide a balance in the fight for market share. Companies that possess numerous key patents normally grant one another mutual-user rights. Google is paying $12.5 billion to advance into this league.

It is debatable, however, whether the possible protection might not have been purchased at too high a price. Along with the undoubtedly attractive patent rights, the web company is also buying a great deal of risk. Motorola has not yet surmounted its difficulties. Other Android partners, like Samsung or HTC, could view the takeover with concern, because in spite of all statements to the contrary, doubt remains whether Google will give preference to its own manufacturers over other makers.

If nothing else, Google has never engaged in the production of devices. The narrow margins in cell phone manufacturing compared to the core business of web search, as well as the comparatively high risks, could strain the development of the web company.