It's war as Google aims to pip Apple in the new tech race
Published 20/08/2011 | 05:00
Apple became the world's most valuable company just 12 days ago, worth an estimated $337bn (€235bn). Yet, no sooner had it pipped oil firm Exxon in the rich stakes than another behemoth was flexing its muscles.
On Monday, Google stunned the technology world by acquiring Motorola Mobility in a massive $12.5bn (€8.7bn) deal. It's a move that almost certainly means the search engine giant is going after Apple's lucrative hardware market -- chiefly smartphones and tablet computers.
The acquisition, Google's largest to date, will help turn the leading search engine, which makes the Android mobile operating system, into a fully-fledged hardware manufacturer with the might to take on Apple and its iconic, covetable products.
It will also control vital wireless patents that will enable it to compete with anybody, including Microsoft, in the mobile domain.
The 24,000 patents it has acquired as part of the Motorola deal are crucial, according to Brian Pitz -- an analyst with global financial services firm UBS -- who has likened the deal to a nuclear arms race.
"Each side has to build its stockpile of arms," he says. "You have to have as many weapons -- or patents -- on your side as your foe."
The deal comes weeks after Google lost out to a consortium of rivals, including Apple and Microsoft, in buying patents held by the bankrupt company Nortel. Google had feared that being shut out of the Nortel deal could damage future plans.
It's little wonder Larry Page, Google's visionary co-founder and CEO, was so bullish when announcing the acquisition this week.
"Together, we will create amazing user experiences that supercharge the entire Android ecosystem for the benefit of consumers, partners and developers," he said.
"There's no doubt about it, the acquisition of Motorola Mobility is a big, big play by Google," says Irish Independent technology journalist Ronan Price.
"Google, through Android, has helped democratise the smartphone, by making handsets available that are far cheaper to buy than the iPhone. And many of those Android-phones, manufactured by the likes of Samsung and HTC, are really very good, although they haven't become part of the zeitgeist in the way the iPhone has.
"One of the big challenges for Google is to create a premium product that has the iconic status of the iPhone or the iPad. And it will need to develop an online store to rival Apple's iTunes. It won't be easy and very few companies -- including Microsoft and IBM -- have been successful in combining hardware and software."
Allen Adamson, a New York-based brand consultant, believes that Google will have its work cut out for it if it wants to challenge the world's most valuable company.
"Apple is associated with the awe-inspiring way it makes things so elegant, so intuitive and so simple," he says. "Beautiful to look at and no instructions required, be it an iPhone or an iPad, it just works. The company has maintained a laser focus on its brand since day one and Apple-ness is inherent in everything it does."
Adamson believes that if Google is to take on Apple head-on, the battle must be "brand-led, not business-led. The key for Google as it moves ahead with Motorola will be whether it can continue to differentiate its brand in a way that consumers continue to find relevant and delightfully gratifying."
That's for the future. In the short term, Google could have several obstacles to hurdle. First, the acquisition is certain to attract significant anti-trust scrutiny with the US Federal Trade Commission already investigating Google's dominance in several areas of its business.
And then there's the significant issue of the mobile phone makers -- Sony Ericsson, HTC, LG and Samsung among them -- who have thrown their weight behind Google's Android.
Now those companies face the prospect of competing against a revived Motorola that, through this week's deal, will have first pickings on the latest and best developments that Google can devise. In short, they will have concerns that Motorola will get preferential treatment.
Carolina Milanesi, an analyst at the worldwide IT research centre Gartner, believes few of those companies who have used Android so successfully will be able to abandon the operating system in favour of a rival.
Google, she noted, have them "by the throat".