Google’s strategy with Motorola and how they used it to fight Samsung

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Samsung is giant. It employs 427,000 staff, has an annual turnover in  excess of $270bn and assets of $600bn spread across over 80 business  units. And Google just floored it twice using Motorola as a baseball bat.

Why ?

On the surface having 81 per cent of Android marketshare would seem to make Google and Samsung best buddies. Samsung has been  the driving force behind Android’s meteoric growth and put Google mobile  devices in pole position.

The problem is Samsung wanted too much credit. It wasn’t enough for  Samsung to make the most popular Android phones and tablets, it had to  hide Android – and consequently Google’s role in its achievement. It did  this using ‘TouchWiz’, the company’s proprietary skin which painted  over all aspects of Android leaving it unrecognizable. To the casual  consumer they were buying ‘a Samsung’, Google’s role was largely unrecognized.

Then things got worse. Samsung began degrading Android performance by  switching out vast parts of the software – phone dialer, calendar,  email client, contacts, notification center, music and video player,  voice control and much more – for its own apps. Reviews were largely negative with TouchWiz and its bloatware slowing down Android, wasting  storage space and the replacement apps were seen as inferior or, worse  still, needless gimmicks.

Samsung then exploited this further. It put TouchWiz on its smart TVs,  another market it dominates, and began building its own Android rival –  Tizen – which, thanks to its TouchWiz interface, looks identical to the  casual observer. The long term strategy was clear: switch over to Tizen  and take the majority of the handset market with it. Google had to act.

How ?

The ‘how’ was Motorola. On 15 August 2011 Google announced it had bought Motorola Mobility for $12.5bn in cash. With it Google acquired more than 20,000 mobile  patents and publicly declared- ‘the purchase of the phone maker would not  in any way compromise relationships with its handset partners… honestly,  really, pinky swear.’

Of course Google didn’t expect handset partners to fully believe this  and platitudes issued from them in reaction to the deal confirmed it.  Should Google use Motorola to ramp up its own major handset business the  market would be theirs. The phones would have stock Android and no-one,  not even Samsung, could afford to subsidise their cost as Google can  leveraging its mammoth advertising revenue.

The bait was set: obliteration by Google stock Android handsets  unless Samsung stopped messing with Android.  Google quietly showed it could walk the walk as well as it ramped up  Nexus production and introduced the well-received Motorola X and  Motorola G which stripped away almost all customisation from stock  Android.

Samsung bit. On 27 January 2014 Google and Samsung signed a  wide-ranging global patent deal which will last a decade. Buried within  it was an agreement that Samsung would tone down TouchWiz, refocus on  core Android apps over its own customisations and cancel more radical  customisations such as its ‘Magazine UX’ interface. Two days later  Google announced the sale of Motorola Mobility to Lenovo showing both  agreements had been working in parallel.

The consequences

The smack down for Samsung is twofold.

Firstly, despite its size and dominance of the Android market, Samsung has been brought back into line. No longer will Samsung run  roughshod over Android’s design, kick out its apps in favour of Samsung  alternatives and hide Google’s hard work underneath. Indications of a  low key Galaxy S5 launch suggest it will stand by its word.

Secondly, the jump off point for Samsung from Android to Tizen is no  longer straightforward. With Android shining through more strongly in  future Samsung handsets it won’t be a seamless switch from one to the  other. If Samsung wants Tizen to succeed it will now have to be earned  rather than snuck in under the radar.

All of which should be good news for Android users who will find it  easier to move between handset makers when they upgrade while a stock  Android experience (particularly with Android 4.4 KitKat’s  optimisations) will make for faster, more responsive budget devices.  Whether it gives smaller handset makers a greater chance to compete with  the all-conquering Samsung, however, remains to be seen.

And what of Google’s supposed $10bn loss? It’s a misreported myth  calculated by subtracting Motorola’s $2.91bn sale price from its $12.5bn  purchase. What it misses are the $3.2bn Motorola had in cash, $2.4bn  saved in deferred tax assets and two separate Motorola unit sales  totalling $2.5bn in 2013. Factor in Lenovo’s purchase and Google has  paid $1bn for what it retained: $5.5bn worth of Motorola patents and the  company’s cutting edge research lab.

Source : Forbes US

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