Google's Motorola bet to reshape Asian phone makers

Google buys Motorola Mobility for $12.5b. to gain access to patents; Asian handset makers could pay more attention to Windows Phones.

By REUTERS
August 16, 2011 10:27
4 minute read.
Motorola Droid phone is seen displaying Google

Motorola Droid phone is seen displaying Google search (R). (photo credit: REUTERS/Brendan McDermid)

 
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SEOUL/TAIPEI - Asian handset makers using Google's Android operating system might turn to rival platforms such as Microsoft's Windows after Google upended the mobile landscape by buying Motorola Mobility Holdings for $12.5 billion.

Taiwan's HTC and Korea's Samsung Electronics have sold millions of mobile devices running on the free Android device, catapulting Google to the top slot in the booming global mobile software market.

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But the acquisition of Motorola could turn Google from a partner to a competitor for more than 30 other Android-handset companies.

"The deal will make most Android players realize how dependent they are on Google and how quickly Google's plans can change their businesses," said Francisco Jeronimo, an analyst at research firm IDC.

Wall Street quickly anointed Microsoft a winner in the deal, with Windows potentially benefiting if the acquisition alienates the other phone makers that rely on Android.

Android held a 43.4 percent share of the smartphone market at the end of the second quarter, ahead of Nokia's 22 percent, according to data from research firm Gartner. Apple ranked third with 18 percent, the data showed.



Motorola shares jump on news of deal

Shares in Motorola's Asia's suppliers jumped on the deal.

Foxconn International Holdings Ltd , the world's top contract cellphone maker, which counts Motorola as a client, surged as much as 17 percent on prospects of more business from the new combination.

Shares of Compal Communications Inc and Arima Communications were among a slew of Motorola suppliers that hit the 7-percent daily limit in Taiwan.

"Everybody is betting on a Motorola turnaround. Motorola will get more help from Google to push its Android handsets with the deal," said Yuanta Securities analyst Bonnie Chang in Taipei. "Outsourcing companies such as Foxconn International and Compal Communications will benefit directly the most."

Shares in Samsung, which has businesses from chips to TVs and energy as well as phones, ended 6.1 percent higher in a broader market up 4.8 percent in post-holiday trade on Tuesday. Fellow Korean phone maker LG Electronics edged up 0.3 percent.

HTC closed up 3.1 percent in a Taiwan market down 0.3 percent.

Deal could provide umbrella for IP patent lawsuits

Some brokers said the Motorola deal could be Google's way to provide support to Android players.

Phone makers and software firms are involved in copy-cat lawsuits in the fierce battle over who owns patents used in mobile devices, with Apple going after Android device makers.

"We suspect that Google will now try to provide an umbrella for the Android community that provides IP protection from key rivals such as Apple and Microsoft. This is broadly how Microsoft protects Windows Phone," Nomura said in a note.

"We do not believe that Google will aim to continue to make handsets long term, but will rather look to spin the business out to an Android partner -- such as Huawei, LG, ZTE, for example."

Globally, HTC has been a standout winner after being the first to roll out a Android-backed smartphone, leaving it most exposed to any shift in the landscape, analysts said.

Nearly all of its smartphones run on Android but it also has a long-standing partnership with Microsoft.

"HTC and Samsung are companies Google can trust but not control to drive market share," Chang said. "If in the long run Google decides HTC and Samsung have very different business roadmaps, it may want to leverage on Motorola to gain market share."

HTC said in May it plans to bring out phones based on Microsoft's new Mango Windows phone software. However on Tuesday, HTC said the Google-Motorola deal would not affect its partnership with Google.

"This is a positive development to the Android ecosystem, which we believe is beneficial to HTC's promotion of Android phones," HTC said in a statement. "The partnership between HTC and Google remains strong and will not be affected by this acquisition."

Some of the fast-growing Chinese companies such as Huawei Technologies and ZTE Corp are also betting on Android.

Huawei, known for its low-cost cellphones, is looking to replicate its telecom gear success in the smartphone market as it takes on the likes of Nokia, Apple and Samsung.

Samsung became the world's No.2 smartphone maker in the second quarter with a 19.2 percent market share. HTC is ranked fifth with 12.1 percent, according to Strategy Analytics. Apple is the top smartphone vendor.

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