Google Breaks Down Why it Bought Motorola -- And Downplays Patents
July 25, 2012 2:39 PM
comment(s) - last by
Google is promoting synergy (like a boss).
Surprisingly, Google says that cash and "goodwill" were also big drivers
Google Inc. (
surprised the tech world last year
with its decision to scoop up struggling veteran devicemaker Motorola Mobility, Inc. -- one of the "big three" of the Android world. Some figured that Motorola's "war chest" of over 17,000 patents amounted to nearly the entire $12.5B USD valuation Google made in its successful purchase bid.
Traditionally, Google did not look to patent its software innovation at the same pace as rivals Apple, Inc. (
from Oracle Corp. (
) directly targeting Google and with Apple
turning up the lawsuit pressure
on OEMs, many felt Google needed to buy the patents to defend itself and its partners.
regulatory filings Google says the patents represented less than half the valuation.
Google's breakdown of Motorola's worth is as follows:
For those curious what exactly Google means by "goodwill", the company elaborates slightly that it is "primarily attributed to the synergies expected to arise after the acquisition."
However, Google has left just about everyone in the dark as to exactly what those "synergies" might be. During its earnings call, it did not discuss its long-term strategy or plan for Motorola.
completed the acquisition
in May, after Chinese regulators finally stopped dragging their heels on approval. U.S. and European antitrust regulators approved the acquisition
One thing is for sure; whatever Google's secret "synergies" may be, they have yet to take hold. Motorola Mobility made $1.25B USD in revenue in the second calendar quarter, but lost $233M USD, once operating expenses were taken into account. Google still managed to
earn $2.79B USD
, though, despite that hardship.
This article is over a month old, voting and posting comments is disabled
7/26/2012 5:08:50 PM
When Google first consummated this deal, they said that it was for the patents, and the hardware aspect wasn't in consideration. I always doubted that. But now, they must modify what they had said because we can see that the value they're getting from the patents has been very little. I believe, from what I know about Motorola, that most of those patents don't pertain to Google's business, and that many that do have little life left in them.
I believe that they were snookered by Motorola's CEO at the time, into buying Motorola for far more than it was actually worth. The day they announced the purchase, Motorola's value was $6.5 billion. Normally, in buying a successful, but not market leading company, there is a premium paid. That's usually about 30%. Rarely is it more unless the company has intrinsic value that the stock price isn't showing. But Google wanted those patents so badly that they paid almost double for it. They were afraid that if they bid a much more reasonable $9 billion, they might be outbid by someone, though who that could have been, I can't imagine.
I bet that they will be writing off that goodwil at some point. Much of the rest of the value they have now assigned seems to be too much. It's almost as though they are trying to find excuses for the excessive price. If they assigned a more reasonable goodwill of $5 billion, and devalued the other areas, it would be much more in line with what Motorola's value would be. Remember that the $6.5 billion Motorola was going for was well over book already. Much of that could have been assigned to goodwill. But by doing what they have, in a financial juggling, they won't have to write down so much in the future, as Microsoft needed to do recently.
Considering all the words that have come out about Android ODM's grumbling about this deal, they may have gained very little overall. If they can't use the ability of Motorola to design and build credible devices that are better than the competition, what would be the purpose of all this? They might even have to sell the hardware division for a possible loss when compared to the value they are now assigning it.
Meanwhile, Motorola's phones aren't doing terribly well. Neither are their tablets. This is really hurting Google's bottom line, and going to severely cut into their reputation as a high margin growth company. In the long run, this will hurt their stock, and require a dividend well before they intended to give one.
RE: But first...
7/29/2012 4:37:49 PM
That sounds believable,barring new information. The Motorola CEO made a good sales pitch for the value of the patents at the time:
We own one of the strongest and most respected patent portfolios in the industry. We have over 17000 patents granted and 7000 patent applications pending, with particular strength in 2G and 3G essentials, non-essential patents important to the delivery of the competitive products in the marketplace, video, particularly compression/de-compression and security technologies, and, finally, a leading position in 4G LTE essentials. With new entrants in the mobile space, resulting from the convergence of mobility, media, computing and the internet, our patent portfolio is increasingly important. We regularly review the company’s strategies, opportunities and assets, including the IP, with the goal of creating and enhancing value.
when I first came here (to Motorola), one of the reasons that I liked this opportunity, was because I had a view that brand and IP portfolio was very strong. As I arrived here and had had a chance to understand our IP portfolio, I actually think it’s stronger then I anticipated. There are really a few areas where our patent portfolio is extremely strong. First, 2G/3G essentials, I think that is very well understood by the (Wall)street and the industry, and we have monetized that asset over the last few years very well. Probably a little less well known is our strength in patent portfolio in non-essential patents, which are capabilities that are important to have in delivering competitive products in the marketplace. Third, I think is in our video coding/de-coding and security, and fourth, probably least understood and most underestimated , is our strength in our 4G LTE patent portfolio. As I look at these patent portfolios, I feel very good that we will be able to go forward and find ways to create enhanced shareholder value.
… that (IP royalty) number has come down over the years as a result of licenses that have expired over that period of time, and they are largely related to our 2G and 3G patent portfolios. As we go forward, I think that the introduction of number of players with large revenues, which have come into the marketplace as a result of the convergence of the mobility, computing, internet and other segments, I think that that creates an opportunity for us to monetize and maximize the shareholder value in a number of different ways and we evaluate all of them all the time.
RE: But first...
7/29/2012 4:41:04 PM
"So if you want to save the planet, feel free to drive your Hummer. Just avoid the drive thru line at McDonalds." -- Michael Asher
Google Q2 2012 Earnings Rise 11 Percent, Deals with Falling Ad Prices/Motorola Issues
July 20, 2012, 10:45 AM
Apple Forced by UK to Print Public Apologies to Samsung for Design Theft Accusations
July 18, 2012, 3:05 PM
Oracle Gets Nothing in Google Android Lawsuit, Opts for Appeal
June 21, 2012, 11:06 AM
Google Completes Acquisition of Motorola Mobility, Layoffs Likely
May 22, 2012, 11:47 AM
Google is Now (Almost) the Proud Owner of Motorola After EU/U.S. Approval
February 14, 2012, 11:40 AM
Moto 360 to go "Champagne Gold" for $299, According to Amazon Listing
October 30, 2014, 3:24 PM
Call-capable Samsung Gear S Smartwatch Launches Nov 7 in U.S.
October 30, 2014, 12:45 PM
Lenovo Completes $2.91B Acquisition of Motorola
October 30, 2014, 11:57 AM
Samsung Electronics Q3 Profit Falls by 60%, Mobile Division Sees 74% Profit Decline
October 30, 2014, 10:10 AM
Microsoft's $199 Fitness Band Packs in 10 Sensors, Works with Windows Phone, iOS, and Android
October 30, 2014, 8:58 AM
Google’s Project Ara Modular "LEGO" Smartphone Shown Booting Up on Video
October 29, 2014, 5:28 PM
Most Popular Articles
Amid Theater Boycott Netflix Defiantly Plans New Movies, Plus 3 TV Shows for 2015
October 24, 2014, 7:30 PM
AT&T Defeats Purpose of New Apple SIM, Locks iPad Air 2 SIMs to Its Network
October 24, 2014, 2:17 PM
CVS, Rite Aid Kill Unofficial Apple Pay Support, Burn Google Wallet Users in the Process
October 25, 2014, 5:26 PM
1 Million Credit Card Activated on Apple Pay Within 72 Hours, Walmart CEO Hopes Visa "Suffers"
October 28, 2014, 8:17 AM
Microsoft's Figures Show Desktop Users Flocking to Windows 10 Preview
October 27, 2014, 11:04 AM
Latest Blog Posts
Costco Gives Employees Thanksgiving Off; Wal-Mart Leads "Black Thursday" Charge
Oct 29, 2014, 9:57 PM
"Bear Selfies" Fad Could Turn Deadly, Warn Nevada Wildlife Officials
Oct 28, 2014, 12:00 PM
The Surface Mini That Was Never Released Gets "Hands On" Treatment
Sep 26, 2014, 8:22 AM
ISIS Imposes Ban on Teaching Evolution in Iraq
Sep 17, 2014, 5:22 PM
Space Terrorism is a Looming Threat For the United States
Apr 23, 2014, 7:47 PM
More Blog Posts
Copyright 2014 DailyTech LLC. -
Terms, Conditions & Privacy Information