By IB Times Staff Reporter: Subscribe to IB's RSS feed
August 17, 2011 10:57 AM EDT
Google Inc. has agreed to buy Motorola Mobility Holdings Inc. for $12.5 billion or $40 a share in cash, valuing each essential patent at about $20 million, to defend its Android ecosystem.
RBC Capital Markets said the deal value of $12.5 billion equates to 0.7 times trailing twelve months (TTM) of equity value-to-sales. In RBC Capital's view, rising intellectual property (IP) threats to Android (and its original equipment manufacturers) from Microsoft Corp. and Apple Inc. were the major driver of the acquisition.
"Google gets Motorola Mobility's portfolio (17,000 patents), and while this deal may not necessarily mitigate some of the intellectual property (IP) wars under way (e.g. Apple and Motorola already suing each other), it may position Google to defend itself against more fundamental IP attacks, and increase counter-threat and leverage in global patent negotiations and litigation," said Mike Abramsky, an analyst at RBC Capital Markets.
Implications for Apple
Apple's smartphone patents relate to multi-touch, object-oriented operating systems, and user interface -- so this may not necessarily mitigate some of the IP Wars currently underway (Apple was suing Motorola Mobility for patent infringement -- and vice-versa -- already so this unlikely to change).
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However, Google's acquisition of more fundamental wireless patents may avoid deeper threats from Apple, Microsoft and also offer Google/Motorola Mobility leverage in cross-patent licensing negotiations, Abramsky said.
Abramsky said Google may in time need to assert some fundamental patent and/or trade lawsuits against Apple and Microsoft using the Motorola Mobility portfolio in order to rectify the balance.
In the longer term, this combination could offer more competition to Apple in Smartphones, depending if Google can leverage Motorola Mobility and the control over hardware/software together to further new innovations, Abramsky said.
Abramsky said Google/Motorola Mobility may reduce Android fragmentation and improve software/hardware integration, so Google/Motorola Mobility may become a better competitor to Apple at the high end of the market.
However product, market and organizational integration between Google/Motorola Mobility may be disruptive in the near term, and may offer Apple some interim competitive advantages, especially with iPhone 5 and iOS 6 due out in the Fall.
From a developer perspective, this may throw some Android developers a curve ball as they try to figure out how this all sorts out for them (regarding original equipment manufacturers versus Android/Motorola Mobility, platform roadmap, etc) and they may even focus efforts around iOS in the meantime.
Apple may de-emphasize some Google services on iPhone given Google is now a direct hardware competitor. The proposed acquisition may give a boost to Google TV, as Motorola also makes set top boxes, and Google TV could become integrated into those devices.
Implications for RIM
Abramsky said the proposed acquisition at 0.7 times TTM of equity value-to-sales equates to $14.4 billion equity value for Research In Motion (RIM) or $33 per share or 34 percent premium.
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