The Google-Motorola merger sees two highly successful companies come together to do battle against another high achiever ”“ Apple. Apple is clearly the foremost competitor after it announced in July a staggering $28.57 billion in revenue during the third quarter. Analysts had a consensus estimate of $24.92 billion.
Much of Apple”™s extraordinary growth was in the mobile device space, with 4.6 million iPads sold in its first full quarter and 20.34 million iPhones sold during the same period. The only notable issue for Apple has been keeping up with demand for its iPad 2. Thus, Google, with its Android (mobile device) operating system has a formidable opponent. Motorola has been under pressure recently from the well-known activist shareholder Carl Icahn, who had pushed Motorola Mobility to divest and increase its share price.
The announced merger gives Google access to Motorola Mobility”™s 17,000 patents and 7,500 filed patents. Telecom patents are tremendously valuable today and Motorola holds 2G and 3G patents along with important non-essential patents for compression and security. More importantly, it also possesses the patent for 4G LTE (long-term evolution), which facilitates high mobility broadband communication for efficient use on trains and automobiles. There are also the financial implications of notable royalties from these patents that should be factored into the benefits of this deal. Handset manufacturers, HTC and Samsung, which run Motorola software on their devices, support the merger.
Not all handset manufacturers are ecstatic with the merger news, however. Nokia has been quite clear with its distaste for the deal. Stephen Elop, CEO of Nokia, warns of the potential for preferential treatment for some handset manufacturers and that there may be some serious battles fought.
Apple continues to dominate the tablet market with the huge success of its iPad and iPad 2. Other tablet manufacturers pale in comparison; Motorola recently announced it does not expect to sell more than 1.5 million units of its Xoom tablet and analysts actually expect fewer units to be sold. The BlackBerry tablet has not fared much better and is now being abandoned by Sprint and has not been adopted by Verizon or AT&T. Dell”™s Streak was a non-starter in the tablet market.
Nevertheless, the No. 1 spot in the tablet market, currently held by Apple, is certainly not secure in a rapidly changing mobile market. This is evidenced by ABI Research, in its recent report that shows tablets running Google”™s Android have taken 20 percent of market share from iPads over the past year. There is a general consensus that Android-operated devices will continue to steal market share away from Apple”™s iPad with the introduction of superior chips. It could be argued that Apple started out so much stronger than Android-run tablets because the operating system was designed for smaller smartphones and did not impress users when moved to larger tablet devices. More recent versions of Google”™s operating system demonstrate that it is a convincing rival to Apple”™s iOS (operating system for iPhone, iPod Touch and iPad).
Of course, the focus of this mega-merger will not simply be on the tablet market but also on the smartphone market as they go head-to-head with Apple”™s iPhone. The new company is undoubtedly in a position of strength ”“ 43 percent of smartphones sold in the second quarter were running Android.
It is unclear who the winner of the mobile device market will be but we can be sure there will be losers. Microsoft looks to be one of the more vulnerable players with its late-coming Windows 7 operating system. The integration of its recent acquisition of Skype will certainly be a part of its future plans but success is not a guarantee. We may see Microsoft follow Google”™s path and bring its partnerships, with companies like Nokia, to a new level. More exit strategies or consolidations will surely be announced in this market.
We can, however, guarantee one winner in the mobile device wars and that is the consumer, who is to benefit from the rapid enhancements we are experiencing to provide us with superior connectivity, productivity and entertainment.
Darren R. Hayes chairs the computer information systems program at Pace University. Reach him at
