Will Google-Motorola Acquisition Piss Other Android Partners Off?

Google has announced that it will acquire Motorola Mobility for $12.5 billion. The search and online advertising company is buying the company for approximately $12.5 billion (or $40 per share), in cash. The takeover will boost the rise of Google's Android software in the nascent smartphone market. The $40-a-share deal – which is Google's biggest acquisition to date – is a 63% premium on Motorola Mobility's closing price on the New York Stock Exchange on Friday.

Motorola, the company which has a history of over 80 years of innovation in communications technology and products, and in the development of intellectual property, which have helped drive the remarkable revolution in mobile computing we are all enjoying today. Its many industry milestones include the introduction of the world’s first portable cell phone nearly 30 years ago, and the StarTAC—the smallest and lightest phone on earth at time of launch. In 2007, Motorola was a founding member of the Open Handset Alliance that worked to make Android the first truly open and comprehensive platform for mobile devices.

Now, Android has become an increasingly important platform for Google, as global smartphone adoption accelerates. The platform, launched in 2007, is now used in more than 150 million devices, with 39 manufacturers. Android has become an increasingly important platform for Google, as global smartphone adoption accelerates. The platform, launched in 2007, is now used in more than 150 million devices, with 39 manufacturers.

The deal also answers a big question about Google’s next strategic step in wireless. Google has been battling withApple and Microsoftover patents. Motorola currently holds more than 17,000 patents, while the acquisition will move Google directly into the telecommunications hardware business, Larry Page, Google’s chief executive, said in a blog post that “this acquisition will not change our commitment to run Android as an open platform. Motorola will remain a licensee of Android and Android will remain open. We will run Motorola as a separate business.” Which means  that it won’t grant it any special advantages compared to other Android partners like Samsung, HTC, and some others. So if that’s the case, the real value would seem to be Motorola’s patent stash, which Google thinks will be a valuable weapon in the high-stakes arms race that has recently started up. Which is why Google executives used the word “protect” at least six times while explaining the deal this morning.

There is a middle ground in Google's acquisition of Motorola Mobility that is not just about just patents. It is not all about Google controlling its own original equipment manufacturer. Nor is it about solely defending the future of the Android ecosystem. This is about Google's standing in the mobile industry, the greater technology environment and its bottom line. The acquisition will also give Google an end-to-end hardware and software strategy with smartphones, tablets and even with Google TV. The thing is, Google didn’t need to buy Motorola. Google could have just licensed the patents from Motorola. Google bought Motorola because it felt like control of the Android experience was slipping away. It’s apparent that one Nexus-like device from Google a year won’t be enough MOTOBLUR has probably given Andy Rubin ulcers — and it’s apparent that a company that’s leading in many areas of the smartphone arena wants to control that entire experience. Open or not, it is Google’s, after all. Smartphones and tablets are also going to be the biggest categories in technology for the foreseeable future, and if you think Google is just going to play around with that, well, you obviously haven’t seen the company’s recent moves.

HTC, Samsung, LG, and other manufacturers are probably pissed. Regardless of any protection they might receive from Google owning Motorola’s patent library, and regardless of recent official comments, they are now not only competing with one of the best Android device vendors, but also with Google itself. However, it doesn’t mean for the next Nexus device. According to statements made this morning by Android chief Andy Rubin, it will be the latter. Google doesn’t expect the acquisition to impact the Nexus program and lead device strategy, he said. ”We select, around Christmas-time each year, a manufacturer to release a phone,” explained Rubin. “After the acquisition, Motorola will be a part of that bidding process and lead device process.”

Making all future Nexus devices Motorola phones could easily anger Google’s Android partners, who will already be nervous about what this acquisition means for them in terms of preferential treatment. Google will have to be careful to not overtly favor Motorola in the Nexus competition, or risk losing its partners to competitors like Microsoft’s Windows Phone, or even HP’s webOS. However, that doesn’t discount the possibility of a Motorola-built Nexus phone (or tablet!) in the future, it just means that this is one area where Google knows it has to step lightly.