Last year, I was surprised to get a proxy notice when Motorola spun off Motorola Mobility from Motorola Solutions. That’s because when it spun off Motorola Mobility, Motorola effectively put a number of key patents into the new company. As a lowly individual investor, I had thought that most of these patents were central to Motorola’s long-term strategy. So why sell them off?
Then, earlier this month when Google announced that it was buying Motorola Mobility for $12.5 billion, I wondered whether or not the “packaging” of Motorola Mobility last year was tailored for a strategic sale this year. One of the reasons that I wondered about the value in Motorola Mobility last year was that Motorola had already sold many of its basic patents, including the TrueSync platform developed by Philippe Kahn’s Starfish Software, to Nokia. TrueSync, which was the first over-the-air (OTA) synchronization solution for wireless devices, is one of the basic patents that all phone makers and carriers use to deliver the kind of wireless experience that smart phone users take for granted.
So what kind of IP does Google get with Motorola Mobile today? Well, it’s hard to remember now, but Motorola owned most of the basic patents in cellular phone technology going back to the earliest police-band radios and car phones, and over the years, it’s acquired or invented a truly stunning range of mobile technology licenses or patents. In fact, Google gets more than 17,000 patents on mobile technology with the purchase. Considering the number of patent cases in which Google is currently embroiled, that’s a clear incentive for the purchase all by itself.
When the deal was first announced, most reporters seemed to focus on the size of the reverse termination fee — Google owes Motorola Mobility $2.5 billion if the deal doesn’t go through for any reason, including regulatory review, or 20% of the total deal. That’s a pretty high consolation prize.
The other part of most of the news stories about the deal was speculation that Google wants to lock down the Android platform the way that Apple has locked down the iOS market. I don’t see that happening. Not because I think that Google wouldn’t do it in a heartbeat if it could, but because I think it’s smart enough to know that if it tried to turn a highly successful “open” platform into an integrated hardware/software/distribution model that locks out HTC, Samsung, LG and other makers, then the hundreds of millions of users who love the low-cost Android devices will eventually migrate to the next shiny new toy from someone who doesn’t try to turn their affordable Android phone into a costly iPhone wannabe.
Motorola Mobility shareholder John W. Keating has filed a class-action lawsuit to block the sale, arguing that Motorola Mobility CEO Sanjay Jha didn’t act int he best interest of shareholders. “The offered consideration does not compensate shareholders for the company’s intrinsic value and stand-alone alternatives going forward, nor does it compensate shareholders for the company’s value as a strategic asset for Google,” the suit says.
At just $40 per share, it’s no wonder that Motorola Mobility shareholders aren’t exactly thrilled with the deal, so I’m not surprised that they’re questioning whether the company’s board did enough shopping around for the best deal. It will be a long time before we know what will happen with the deal.
Only one thing seems certain. IP attorneys are salivating at the possibilities, and it will almost certainly play a big role in future litigation between Microsoft, Apple, Google and others who want to play in mobile’s future.