Google's Acquisition of Motorola Mobility: Will the 'Gamble' Pay Off?

Google's Acquisition of Motorola Mobility: Will the 'Gamble' Pay Off?
Case Code: BSTR420
Case Length: 21 Pages
Period: 2010-2011
Pub Date: 2013
Teaching Note: Available		 Price: Rs.500
Organization: Google Inc., Motorola Mobility Holdings Inc.
Industry: Mobile devices, Information Technology
Countries: USA
Themes: Acquisition
Google's Acquisition of Motorola Mobility: Will the 'Gamble' Pay Off?
Abstract Case Intro 1 Case Intro 2 Excerpts

Abstract

On August 14, 2011, US-based multinational corporation Google Inc. (Google) announced that it would acquire Motorola Mobility Holdings Inc. (Motorola Mobility) for US$ 12.5 billion. Motorola Mobility's attractive patents in mobile communications and technologies, which were a part of the acquisition, provided the main impetus for the deal. Google needed these patents to defend its mobile operating system Android that had come under attack from competitors. Android, launched in 2007 as a free and open source software, had found several takers and handset manufacturers like Samsung, HTC, and Motorola had come out with Android phones. Several other companies had followed suit and Android had become the leading mobile-phone operating system in the world.

In the smartphone market, where the competition is cutthroat, Android faced several anti-competitive threats. It was not only Google but also the other Android handset manufacturers who became the target of patent suits. Companies like Apple, Microsoft, Oracle, etc. filed several patent infringement suits. The number of patents that Google held was not high enough for it to defend Android.

Google planned to acquire patents from a bankrupt telecom company Nortel, but was outbid by a consortium consisting mainly of its competitors. Google then decided to acquire Motorola Mobility which had 17,000 patents and 7,500 pending patent applications.

Though the acquisition was expected to benefit Google it came with a host of problems. There were apprehensions that it could alienate the Android partners, who ,might see Motorola Mobility as a threat and a competitor. The acquisition also marked Google's entry into the low-margin hardware business, which required different capabilities from the ones Google had to operate. Both the companies operated in different environments and proper integration was necessary to make the acquisition successful. There was also the threat of regulators not approving the deal. Besides, it was not clear if the patents would indeed protect Google against all the existing and potential lawsuits. The question was whether the acquisition was a gamble for Google?

Issues

The case is structured to achieve the following teaching objectives:

  • Understand acquisition as a growth strategy through Google's acquisition of Motorola Mobility
  • Examine the rationale behind the acquisition
  • Analyze acquisition as a strategy to face competition
  • Understand how vertical integration is achieved through acquisitions
  • Study the problems an acquisition can bring with it

Contents

Keywords

Google, Motorola Mobility, Acquisition, Android, patents, lawsuits, Apple Inc., iPHone, Samsung, HTC, Android Partners, Smartphone market, Mobile devices, smartphone operating system, merger, mobile hardware, mobile software, mobile communications and technologies, Microsoft, Oracle, open handset alliance

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