Is Google Going Backwards?
Following Google’s recent announcement that it is buying Motorola Mobility for $12.5 billion, Standard and Poors (the US credit rating agency) has now said that it has downgraded Google stock from ‘buy’ to ‘sell’.
I think that Motorola’s finest moment was when its flip phone was used in the movie Hook; certainly it has dominated handset sales for many years, but with over half of the phones sold in the UK in the last 12 months being smartphones and Motorola not having a share of that market it makes you wonder at the commercial sense of the move.
Allegedly the purpose behind the deal was to protect Google from IP litigation from Apple, Microsoft et al over its Android handset operating system. Motorola apparently holds in the region of 17,000 patents with7,500 more pending. How this is going to benefit Google, God and Googlers only know.
With Nokia and Motorola being left behind in the smartphone wars, it looks like a clever move by Motorola to generate a massive cash injection and allow it to divest itself of a division which could become a liability in the very near future, especially with the company posting a $56 million net loss last year!. S&P’s decision reflects its concerns that the deal “would negatively impact Google’s growth, margins and balance sheet”.
Samsung meanwhile appears to be getting nervous that its position as a world leader in hardware technology is being threatened by software suppliers. Samsung Electronics’ chairman Lee Kun-hee called a last-minute meeting in the aftermath of the deal’s announcement, Yonhap News reports, in which he warned execs that IT power is shifting from hardware companies like Samsung, to those selling software. Mr. Kun-hee’s fears appear to revolve around the idea that its key rivals – Motorola, Nokia, Apple and others – all have close ties to a high-profile player in the smartphone and tablet software ecosystem.Continued on the next page