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Google continues to struggle to leverage Motorola

On Friday, there was a degree of vindication for Google Inc. (GOOG) and its struggling subsidiary Motorola Mobility when a judge with Mannheim regional court in Germany ruled that the Android phonemaker did not infringe on a Microsoft Corp. (MSFT) patent on making applications work on different handsets.

I. Motorola Wins Case, But is Still Banned

However, the victory was but a hollow one for Motorola.  The company has lost three patent cases to Microsoft in Germany.

Motorola has won a preliminary victory against Microsoft, but is facing an investigation in the European Union regarding FRAND abuse.  To add insult to injury, U.S. federal district and circuit appeals courts have ruled that Microsoft is allowed to enforce bans and possible destruction of the Android phonemaker's handsets in Germany, but if Motorola Mobility enforces its injunction to ban Windows and Xbox products, it will be harshly fined.

Both Motorola and Microsoft are U.S. companies, so it's unclear why U.S. courts are okay with Microsoft banning Motorola in Germany, but are not okay with Motorola banning Microsoft in Germany.  Regardless, the net result is that phonemaker's German inventory has been taken off the market and is scheduled for destruction.

Xbox 360
U.S. courts have allowed Microsoft to ban Motorola's products in Germany, but have forbidden Motorola from taking advantage of a similar ban on Microsoft products. 
[Image Source: Justin Sullivan/Getty Images News]

Google and Microsoft are locked in a global patent war, after Google's Motorola became the only major Android phonemaker to refuse to pay Microsoft a steep licensing fee per handsets.  Other Android phonemakers have been forced to pay $10-$15 USD per handset, a big win for Microsoft as it makes the $25/handset OEM license price of Windows Phone [source] more cost comparable to Android -- which is free before licensing fees.

II. Motorola Layoffs Draining More Cash Then Expected 

For Google there was bad news as well regarding Motorola.  On Thur. the technology giant reported that Motorola's layoffs would cost it an addition $300M USD -- a 9 percent hike in the previous estimate.  

Needham & Company analyst Kerry Rice, in a comment to Reuters, suggests the big mystery is what exactly Google wants with Motorola other than its patents -- which so far have been less-than-useful against Microsoft and Apple, Inc. (AAPL).  He remarks, "There's some lack of fully understanding beyond those patents what there is for Google to do with Motorola.  Investors have been waiting to see if Google keeps it as is, or makes any drastic changes by selling off certain divisions or manufacturing operations."

One option that is a topic of rumors is the possibility for Google to sell off Motorola's set-top box business.

Layoff notice
Google is laying off a fifth of Motorola's employees as it attempts to restructure the phonemaker.
[Image Source: Village Voice]

Google has publicly stated that it wants to streamline Motorola's mobile business, as well, ditching the veteran phonemaker's feature phones and transitioning to a mostly smartphone lineup.  Google is also looking to close some of the phonemaker's 94 regional offices, pulling out of unprofitable markets.  In Asia -- a key region of struggles -- Motorola will scale down efforts, but not pull out for now.

While the severance pay and layoff of 20 percent of Motorola's workforce is concerning, some of the departures may find new homes at either Samsung Electronics Comp., Ltd. (KSC:005930) and Nokia Oyj. (HEX:NOK1V) who are battling for feature phone dominance, as Motorola exits this low-end market.

Sources: Reuters [1], [2]



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