Google's Motorola purchase beneficial all around, even to odd bedfellows

Google's announced $12.5 billion purchase of Motorola Mobility puts it in the enviable position of — like Apple, RIM and Hewlett-Packard — controlling both the software and hardware components of its chosen mobile ecosystem.

"Motorola Mobility’s total commitment to Android has created a natural fit for our two companies," Google CEO Larry Page said in a statement this morning, referring to Motorola's exclusive use of Android in its smartphone lineup. "Together, we will create amazing user experiences that supercharge the entire Android ecosystem for the benefit of consumers, partners and developers."

In a call with investors this morning, however, as well as in a post on Google's blog, Page emphasized that Google will operate Motorola as a separate business that will remain a licensee of Android and that the Android platform will "remain open."

Analysys Mason Analyst Steve Hilton, in a research note this morning, noted that Google was in the unusual position of not needing "to own a handset manufacturer to be successful. It had already created pull-through demand by building a strong application market and end-user demand."

Such comments make clear that the deal, while beneficial to Google on multiple fronts, was most heartily motivated by Google's need for Motorola's patent portfolio.

Google's shallow portfolio has forced it to (unbecomingly) look the other way when its Android partners have come into patent trouble. (MDP: Microsoft Goes After Samsung For a Piece Of Each Android Smartphone Sold) And Google came into more trouble when Microsoft, Apple, Oracle and a handful of other companies joined to purchase a patent treasure trove from the bankrupt Novell. (MDP: Microsoft quick to knock the patent white hat from Google's head, and arguably rightly so)

Page noted in his blog post:

We recently explained how companies including Microsoft and Apple are banding together in anti-competitive patent attacks on Android. The U.S. Department of Justice had to intervene in the results of one recent patent auction to “protect competition and innovation in the open source software community” and it is currently looking into the results of the Nortel auction. Our acquisition of Motorola will increase competition by strengthening Google’s patent portfolio, which will enable us to better protect Android from anti-competitive threats from Microsoft, Apple and other companies.

Motorola's patents, however, are far from all that Google has to gain from the acquisition.

"Owning a credible manufacturer where you can begin to incubate, pre-test, and implement new mobile-centric solutions is a good thing for Google," Hilton added. "Google will now own a hardware vendor where its OS and applications can — in theory — be leading-edge. Some consumer will be willing to pay for those types of solutions."

Motorola, despite Google's pledge to show no favoritism, is likely also breathing a sigh of relief, as the company posted a net loss of $56 million during the second quarter, compared to earnings of $87 million a year ago.

"Motorola Mobility was facing an uphill battle in a war that pitted it against one Goliath (Apple) and numerous Davids (HTC, LG, Nokia, Samsung)," said Hilton.

But where does the deal leave all of those "Davids," who, with their established relationships with Google via Android, now find themselves both its partners and competitors?

"Vendors make strange bedfellows with other vendors, however, we live in a world where there’s plenty of vendor promiscuity," Hilton told Connected Planet. "I think Google wants to make sure Android is the world’s most prevalent OS in the mobile sector, and to do so it’s going to have to play nicely with all the Davids."

Extending the bedfellows metaphor, Forrester Analyst John McCarthy opined on his blog that the deal, which puts Google in the "very awkward position of being half-pregnant and trying to be a provider of an open source 'environment' while at the same time competing with its 'customers,'" works in favor of Apple — despite Google's sure hopes of using the acquisition to bolster it in its fight against the iPhone.

"The Apple story of simplicity and focused innovation at the app level has won out over complexity and innovation at all levels," wrote McCarthy. "Unfortunately, the deal extends the overall market fragmentation at a platform level well into 2013 to the frustration of developers."