Google's Acquisition of Motorola: Software, Hardware, Everywhere

Google's Acquisition of Motorola: Software, Hardware, Everywhere
Case Code: BSTR401
Case Length: 18 Pages
Period: 2010-2011
Pub Date: 2012
Teaching Note: Not Available
Price: Rs.500
Organization: Google, Inc., Motorola Mobility Holdings, Inc.
Industry: Smartphones, Information Technology
Countries: Global
Themes: Managing Networked Businesses, Corporate Strategy, Mergers and Acquisitions
Google's Acquisition of Motorola: Software, Hardware, Everywhere
Abstract Case Intro 1 Case Intro 2 Excerpts


On August15, 2011, Larry Page (Page), CEO of Google, Inc., the leader in the online search engine segment and a major player in other web services and software, announced that the company was taking over mobile device manufacturer Motorola Mobility Holdings Inc (MM). Questioning the rationale for the purchase, an industry observer commented that Google's investors could be pardoned even if they were to apprehend that Google's subsequent buy would be a Hollywood movie studio. Immediately after the announcement, Google's shares slumped 1.2%. The next day, the rating agency Standard & Poors (S&Pi) marked down Google's ratings from a recommendation to buy its stock to a sell position.

One of the reasons for the S&P downgrade was that the deal could force Google's Android partners like Samsung, which were also MM's competitors, to start focusing more on making devices powered by other operating systems. S&P also criticized Google for getting into a brick-and-mortar business, where the margins were slim, a business which was sustained due to a few blockbuster products and whose fortunes were intertwined with those of the economy. It felt that MM would prove to be a drag on Google's financials, reducing its growth prospects and operating profits. Page, however, maintained that a combination of Google and MM would create superior mobile experiences, in the process benefitting all the stakeholders, that MM would be operated as a distinct entity, and that Google's smartphone operating software Android's openness would be preserved (it was previously available for free). However, many analysts remained unconvinced and felt that Google had committed a phenomenal folly. The questions before Google's senior management were: How could Google derive the potential synergies from the acquisition of MM? Did Google have the resources and competencies to manage a brick-and-mortar business? How could Google manage its relationships with its alliance partners for Android? Could Google simultaneously compete with its partners and also collaborate with them?

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