The Good, The Bad and The Ugly
The other day I was browsing Quora topics and there was one question that caught my eye.
After I read about it, I searched it a lot… I mean a lot. I found out that there is a huge question on Google’s strategy and there are many different answers. Although it is clear that this is a strategic decision and nobody expected from Google to sell Motorola so easily. Lenovo bought Motorola on 29 January 2014 for $2.91 billion. Huge amount, huh?! but still, there are $9.59 billion to cover up Google’s investment. Why did Google made this decision?
I found the best answer that described this strategic masterpiece. For copyright reasons and because I don’t want to substantially change the text by mistake, I’m pasting it as it is.
So the answer is by Dhruv Sangvikar and it is a sourced article, I hope it makes it clear.
On the surface having 81 per cent of Android marketshare would seem to make Google and Samsung best buddies. Samsung has been the driving force behind Android’s meteoric growth and put Google mobile devices in pole position.
The problem is Samsung wanted too much credit. It wasn’t enough for Samsung to make the most popular Android phones and tablets, it had to hide Android — and consequently Google’s role in its achievement. It did this using ‘TouchWiz’, the company’s proprietary skin which painted over all aspects of Android leaving it unrecognisable. To the casual consumer they were buying ‘a Samsung’, Google’s role was largely unrecognised.
Then things got worse. Samsung began degrading Android performance by switching out vast parts of the software — phone dialler, calendar, email client, contacts, notification center, music and video player, voice control and much more — for its own apps. Reviews were largely negative with TouchWiz and its bloatware slowing down Android, wasting storage space and the replacement apps were seen as inferior or, worse still, needless gimmicks.
If you have used TouchWiz, you’ll know that its not the best out there and definitely not better than pure stock Android experience. Many of the first users used to download external launchers instead of using TouchWiz.
Samsung has upgraded the latest versions of ti to a much better UI in order to beat the HTC Sense and Pure Stock Android. Also they started putting it on smart TVs by the name of Tizen. Samsung’s long term strategy was to switch over to Tizen and take the majority of the handset market with it.
Now, is Google’s turn.
The ‘how’ was Motorola. On 15 August 2011 Google announced it had bought Motorola Mobility for $12.5bn in cash. With it Google acquired more than 20,000 mobile patents and publicly declared the purchase of the phone maker would not in any way compromise relationships with its handset partners… honestly, really, pinky swear.
Of course Google didn’t expect handset partners to fully believe this and platitudes issued from them in reaction to the deal confirmed it. Should Google use Motorola to ramp up its own major handset business the market would be theirs. The phones would have stock Android and no-one, not even Samsung, could afford to subsidise their cost as Google can leveraging its mammoth advertising revenue.
The bait was set: obliteration by Google stock Android handsets unless manufacturers (read: Samsung) stopped messing with Android. Google quietly showed it could walk the walk as well as it ramped up Nexus production and introduced the well-received Motorola Moto X and Motorola Moto G which stripped away almost all customisation from stock Android.
Samsung bit. On 27 January 2014 Google and Samsung signed a wide-ranging global patent deal which will last a decade. Buried within it was an agreement that Samsung would tone down TouchWiz, refocus on core Android apps over its own customisations. Two days later Google announced the sale of Motorola Mobility to Lenovo showing both agreements had been working in parallel.
Firstly, despite its size and dominance of the Android market, Samsung has been brought back into line. No longer will Samsung run roughshod over Android’s design, kick out its apps in favour of Samsung alternatives and hide Google’s hard work underneath. Indications of a low key Galaxy S5 launch suggest it will stand by its word.
Secondly, the jump off point for Samsung from Android to Tizen is no longer straightforward. With Android shining through more strongly in future Samsung handsets it won’t be a seamless switch from one to the other. If Samsung wants Tizen to succeed it will now have to be earned rather than snuck in under the radar.
Let me wrap up a bit, Google purchased Motorola for $12.5bn, which came along with Motorola Home and Motorola Mobility divisions. Firtsly, they sold Motorola Home division to Arris Group Inc for $2.5bn. After that, Google sold the Motorola Mobility division to Lenovo for about $3bn. By the time Google purchased Motorola, they had $3bn in cash. Also there were other tax assets, up to about $2.5bn as well. With a quick calculation turns out that Google paid about $3bn and retained $3.5bn worth of Motorola patents and the company’s cutting edge research lab.
That’s one hell of a business strategy planned by Google and executed perfectly with the purpose of flooring Samsung, they did it twice.
So, you might think that Google made a brilliant move. Let’s wait and see how things come up. Google might be the winner or the loser.
P.S. The title doesn’ t have some sort of connection with the story, I just liked it. Peace! :D