You probably saw the news that Google sold off its Motorola unit to Lenovo for about $2.9 billion. While this marks the second multi-billion-dollar acquisition by Lenovo this week, I find the Google aspect of it far more interesting. Many financial analysts were not surprised by Google's move out of the phone hardware business. It presents an interesting contrast to Microsoft, which paid more than $7 billion for Nokia not long ago. Microsoft zigged to match Apple and Google, which were both in the phone hardware business. Google now zagged by ditching the hardware.
I guess maybe that is as it should be. Google wants to lead, not follow. Microsoft, on the other hand, has been playing catch up in the mobile space now for years. The question is: in the long term, which is the smarter play here?
From Google's point of view, they got what they wanted out of Motorola. They are keeping the lion's share of the patents that came with the original $12 billion Motorola buy. As part of the Lenovo deal, they will license most of these to Lenovo, and Lenovo actually claims ownership of about 2,000 patents. At the end of the day, Google bought Motorola more for patents than anything else, it seems.
The Motorola experiment did give Google a chance to get some valuable brains in the mobile space, as well as some hands-on experience. Long term, though, I always felt Motorola was just too much of a conflict for Google. How could they get Samsung, HTC and so many others to continue to support Android while they themselves were in the hardware business? I would not want to be the partner manager who had to answer that sticky question. Ultimately, I think Google made the right choice here. I am also sure Samsung, HTC, LG and others are really happy with this move.
Lenovo, on the other hand, is becoming a hardware monster. It already owns the IBM PC and laptop business. It now owns the IBM x86 server business, as well as its own computer hardware and mobile hardware. Now it adds the Motorola line to the mix.
Does anybody still question Chinese dominance in the tech hardware space? Of course, I can already hear the whispers. Are NSA-like backdoors being built in here? Mark my words - it is only a matter of time until we hear stories, true or not.
What about Microsoft? Unlike Apple, Microsoft ike Hyman Roth from the Godfather, has always made its partners money (I just love it when I can work a Godfather reference in). It never got in the PC hardware business (mice and keyboards don't count) and companies like HP, Dell, Lenovo, IBM, etc. all sold computers almost exclusively with the Microsoft OS.
In the phone business, Microsoft once had a similar strategy with many manufacturers, including Nokia, which sold Windows-based phones. With the Nokia buy, many of these handset makers have to be asking the same questions they asked of Google. How can they compete with Microsoft's own in-house brand? What is Microsoft's answer?
Ultimately, you can't serve two masters. Either Microsoft has to make Nokia the de facto exclusive or top Windows phone brand, or they need to get out of the phone hardware business. Maybe it can keep the treasure trove of patents it got in the Nokia deal, too.
Either way, Microsoft has to do one or the other. I can't see how you can have an in-house brand and try to get other hardware folks to compete against you.
Ultimately, did Google outfox Microsoft here? Microsoft made a $7 billion zag, and now Google has zigged the other way.