The New Google

It is going to be a game changer, and on a big scale, but no one’s clear exactly how. The $12.5-billion acquisition of Motorola Mobility Holdings Inc. gives Google 17,000 registered patents, and another 7,500 pending ones. Google itself has a small number, and in its attempt to buy Nortel’s 6,000 patents, was outbid by a consortium led by Microsoft and Apple (Google offered $900 million, the consortium paid $4.5 billion). So most analysts agree that the Motorola acquisition is a defensive move to give Google teeth in its patent battles.

Google faces several patent challenges against its Android operating systems for mobile phones. Oracle Corp has claimed in court filings that the Android system infringes on its patents that use Java programming tools; Apple has filed suit indirectly, by suing Samsung, HTC and Motorola claiming Android infringes upon its tablet and smartphone patents. Analysts say there are roughly 250,000 patent claims for mobile phones, many of which are questionable.

Rumours about Google’s acquisition of Motorola first surfaced in January 2010, but nothing seemed to come of it then. Is the purchase of Motorola expensive? Not as much as Microsoft’s acquisition of Skype, according to some — Google is paying a 63 per cent premium over market price of Motorola’s shares, at $40 a share.

Google says other Android OS users — in effect Motorola’s competition — will continue use the Android OS; it is not licensed, but Google makes a large amount of money selling advertising with Internet searches conducted using Android phones. The larger question is: if what Google wanted was just the patents, why not buy just them instead of the company? Google did that when it bought IBM’s 1,000 patents.

If Google’s purchase of Motorola is to integrate software and hardware into the same company a la Apple, another company is taking a different route to the same end. Two days after Google’s announced purchase, Hewlett Packard (HP), the world’s largest PC maker, announced it was in talks to buy Autonomy, a Cambridge-based firm that makes software that searches and organises data, for $10 billion. Autonomy is listed on the London Stock Exchange.

At the same time, HP will spin off its printers and PC businesses into a separate entity, if not sell it off entirely. The move is being read as HP’s attempt at becoming more of a software company. When HP hired Leo Apotheker as CEO, it announced that in the future, it would underscore software. Apotheker used to run, SAP, one of the world’s largest software firms. Some time ago, HP bought EDS, a technical services firm that made Ross Perot a billionaire, and subsequently bought Palm, the developer of Web OS.

On Friday, HP announced that it will discontinue operations for webOS devices, specifically the TouchPad and webOS phones. In an earnings call with analysts on Thursday, Apotheker had said “consumers are changing the use of their PC. The tablet effect is real and sales of the TouchPad (HP’s answer to IPad) are not meeting our expectations.” The PC market is contracting, but Apple’s Macs have outsold the rest for 21 consecutive quarters.