What Does Google Want With Motorola Mobility?

In buying Motorola Mobility Holdings (NYSE:MMI), Google (NASDAQ:GOOG) will be getting so much more than a mobile handset maker. Motorola Mobility has 25,000 patents for mobile devices and mobile software and application, as well as wireless accessories, set-top boxes and video distribution systems, and wireline broadband infrastructure products.

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So what is it that Google (NASDAQ:GOOG) wants with Motorola? Many are saying it’s the mobile phone maker, which sold 10.6 million handsets last year, 42% of which were smartphones. While the Android operating system is currently open source, a large part of why it has successfully become more popular than iOS, which is only available on Apple (NASDAQ:AAPL) iPhones, Google might be looking to cut out the middle man.

That would be a huge upset for everyone from AT&T (NYSE:T) and Verizon Wireless (NYSE:VZ), which sell Android phones, to Samsung and HTC, the two top makers of Android-based smartphones, who could be looking at losing access to the OS altogether, or at best be facing increased competition from Motorola. Though Motorola has been devoted to building Android devices since 2008, the company has been struggling to increase its market share amongst its more successful competitors. Google could potentially change that, giving Motorola a leg up against the competition.

But Google (NASDAQ:GOOG) insists that it will run Motorola separately from the rest of the company, that it will receive no preferential treatment when it comes to Android, and that its purchase was meant to “protect” Android, though neither Larry Page, Google’s founder and CEO, nor any other Google executives participating in this morning’s conference really explained what they meant by “protect”. It might simply mean that Google now has guaranteed access to at least one device maker it can count on to use Android, even if the rest jump ship when a newer, better software surfaces. Or it could mean that Motorola’s patent portfolio provides a nice cushion for Android, allowing it to grow and expand without violating copyrights. Motorola’s patent portfolio is quite extensive, with 17,000 patents and another 7,500 pending.

One would be remiss in thinking this is just about smartphones and Android. While that may have been the main factor at play in the decision to acquire Motorola, Google (NASDAQ:GOOG) got so much more than a handset maker and some mobile patents. When asked about Motorola’s set-top box division during this morning’s conference call, Larry said he was “very excited” about that division of Motorola’s holdings, while Motorola Mobility CEO Sanjay Jha said there would be a convergence of set-top and mobile in the near future. What that means only time will tell, but the set-top business certainly has potential, whether or not it is realized.

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With cable subscriptions declining as consumers cut the chord in favor of online streaming-video services like Hulu, Netflix (NASDAQ:NFLX), and Amazon on Demand (NASDAQ:AMZN), Motorola’s set-top boxes could have been on their way out. But Google could breathe new life into them by taking the Internet to the TV. There is still a lot of potential in a viewing platform that combines television with interactive online elements that hasn’t even been realized by Apple with Apple TV. Internet TV hasn’t really caught on yet and is still in the early stages in terms of development, but that means there’s room for Google to swoop in with the next big thing.

Whatever Google (NASDAQ:GOOG) decides to do with their new acquisition, they have a lot to follow through on in order to convince investors it was $12.5 billion well spent.

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