Google Buys Moto IP and 17K Cell Phone Patents for $12.5B

August 16th, 2011

Yesterday, Google announced it will purchase Motorola Mobility Holdings Inc. (MMI), the company’s mobile device group spin-off, in a $12.5B cash deal describe primarily as a “defensive move” for the search engine giant. Google plans to use the early day Motorola patents to boost their IP portfolio in a deal that includes Motorola’s 17K patents in the cell phone / mobile space. These already granted US and world-wide patents plus thousands more still under review (about 7500 more) will help Google protect their Open Source Android O/S, now the darling of the Smartphone set, that recently came under vicious patent attack from entrenched players like Apple and Microsoft.

What prompted the multi-billion dollar move by Google was what some are calling the year of the patent wars. As recently as last month the US ITC (International Trade Commission) ruled in favor of upholding two of Apple’s software patents against smartphone rival HTC, a leading user of the Android O/S. Samsung, also depending heavily on the Android platform, had even worse luck against Apple in court and is now restricted from selling its Galaxy Tab 10.1 in Australia. A similar ban in Europe was temporarily lifted while the original ruling is under review. For details see this BBC story that broke today.

At the heart of the software code in the ITC ruling is one Apple patent (no.: 5,946,647) filed back in the Motorola “beeper era” of 1996-way before the advent of the smartphone. This is software code that highlights data like web links and phone numbers for quick access to e-mail or number dialing, by simply touching (or at the time clicking) on the relevant text.

And that’s the point… if Apple’s (and Microsoft’s) long history in the computing space gives it ammo against Android, Motorola’s history is even deeper in the cell phone space. The company helped create the cell phone market almost 30 years ago with the advent of the first portable cellular DynaTac (brick) and later (1996) the popular StarTac (flip) phone. Both were popular, and ground breaking, but it was the launch of the Motorola Razr in 2004 with new innovations like touch sensitive external screen and portability that helped usher in the mainstream cell phone era. Razr sold a whopping 50M units by 2006, and another 80M by 2008, making it the best selling clam-shell phone in the world.

But for now the industry is abuzz with predictions that Google will disenfranchise its OEM smartphone customers by jumping on the hardware bandwagon-moving from Android O/S provider to direct competitor. But don’t forget, Android is not sold to anyone, it’s part of the Open Handset Alliance, and given away to the OEM’s. Also, the software is hugely successful, particularly for top handset maker Samsung.

For example, IDC numbers recently quoted in PC Magazine said the Samsung Galaxy S line “…shipped 17.3 million devices, a 380.6 percent change from the 3.6 million smartphones it shipped in the second quarter of 2010. That, IDC said, was the largest year-over-year growth of any vendor in the top five.”

We think this move by Google is a necessity, given the unfortunate (and unproductive) direction in how some technology companies chose to focus on the courts and litigation rather than the lab and innovation to improve market share and profits.

As characterized by Google CEO Larry Page on his official BLOG: “…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.”

For now it’s hard to predict the long-term consequences of this move. We think Google may simply spin-off its new hardware group, once the deal is official, and the Android O/S secured from patent attack. The company is more interested in getting back to business as usual, with yet still billions to be made in untapped ad revenue, on all Android platforms, phones, Tablets, and yes-even TVs. With this kind of gold mine, who needs to do hardware? – Steve Sechrist

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Did Apple Just Lock-in the e-Magazine Space?

May 10th, 2011

With its solid dominance in the tablet space, hovering somewhere between 75% and 90% market share, Apple’s iPad may have just solidified long-term supremacy by locking in top magazine content providers Time, Hearst and now Condé Nast (CN). The most recent CN deal announced today and a Hearst Publishing deal on May 5th, offers the high profile magazine content providers access to an irresistibly large install base of tablet users-with the recent promise of counting those extra eyeballs toward total circulation numbers. The ability to count those users is perhaps the most important ingredient in this deal.

For Apple iPad owners, they can now purchase subscriptions to The New Yorker, Wired,Glamour and even GQ Magazine, not on glossy published paper, but delivered digitally to the high resolution, 10-inch iPad display.

As noted, it was advertising that held the key to the breakthrough for Apple and the Manhattan publishing world. As David Carr of the New York Times (NYT) reported last month, the iPad publishing deal was realized with a slight change in circulation counting methods adopted by the powerful http://www.accessabc.com/ board (ABC). It determined that “…each of those digital subscriptions will count toward the all-important rate base – the number of copies used to sell advertising – even if the electronic version is not precisely identical to the print edition.”

This ability to count eyeballs on digital platforms is a big deal to publishers. Magazine owners can command upwards of six figures for a single full-page print ad (i.e. $141K in the New Yorker example cited by the NYT article above.) That’s orders of magnitude above the page rate for a web publication.

For its part Hearst, who initially planned to launch its own flexible e-Magazine tablet reader called the Skiff, even went so far as to show a prototype device at CES-2010 based on a Marvell chip set and LG flexible display (for details see the Jan-10 issue of Mobile Display Report, p.24.) But the company may have found CE tablet devices much harder to get to market than the next issue of Esquire, Popular Mechanics, or O, the Oprah Magazine, that the company now makes available on the iPad for $1.99/ issue or $19.99/year.

Time is last to the content party on Apple iPad, offering a digital version of select magazine content, free to subscribers with paid print subscriptions. But the recent deal represents a content breakthrough for the Cupertino, CA based Apple, struggling of late to get the high-profile content providers to sign up with Internet-based digital distribution. This is also reflected on the TV / video side, where both AppleTV and GoogleTV are having similar problems securing premium video content on their respective set-top box offerings.

While circulation numbers are a critical part of the story, it’s huge installed base of the Apple iPad that no doubt played a major role in bringing the big publishers to the table. Recent industry sources put tablet shipments somewhere close to 40M iPads (of either vintage) by the end of 2011. Apple’s growth rate is strong, even if it is affected by Tsunami related supply issues in Japan. By the end 2012, Apple’s installed base could be approaching 100M units – a huge audience that can’t be ignored. Does this start to sound like what the iPod did to the music industry?

The two Apple tablets now enjoy at least 75% of the market share, and if you drill in a bit, looking at number of units shipped verses what has actually sold, we may be closer to 90% market share for the Apple iPad. See the BusinessInsider.comarticle for a good discussion on “channel stuffing” and Android tablet market share vis-à-vis iPad.

The new ABC publishing ruling combined with incremental changes from Apple, seemed to tip the balance in favor of pubs moving forward on digital distribution on the iPad. And like the music business, magazine publishers faced with the winds of change from digital distribution and the Internet, may just have found a safe harbor in partnering with Apple. – Steve Sechrist

Google Sees Life in the Cloud w/o Windows

December 14th, 2010

In honor of Nostradamus’ birthday (December 14, 1503), I’m going to make a prediction. I see the future of humankind controlling the weather — No, just the clouds, actually. They will eat of the clouds and have knowledge, and the “Windows” will have no light, and there will be no “Gates” to slow them down, or to pass through…

GoogleTV Knows Old Habits Die Hard… Unless You Don’t Have the Habit…

October 26th, 2010

In a world where old habits die hard, some now think a hybrid content delivery approach can create a new sweet spot between traditional linear broadcasting and over the top IPTV. By hybrid, we’re talking about a blend of live TV broadcast and internet-based on-demand content. The linear broadcast schedule helps to create “demand”, while time shifting and Internet delivery offer convenience.

Apple and Google–Giants of a New Age

September 21st, 2010

A recent Adam Sharp article in Seekingalpha.composes the interesting question, “Which stock will reach $1T (trillion) market capitalization first?” The publication argues that market cap (a stock’s price times total shares outstanding) is the best measure of a company’s worth as “…it takes everything into account: assets, liabilities, growth, and more.” Interestingly Apple and Google are two of his top contenders with market cap at $251B and $161B respectively.

Even though it is in third place today, Sharp believes Google will take that top prize, perhaps a decade from now citing “unparalleled talent” and opportunity, with the comment, “So far, they’ve only seriously capitalized on search. Watch for YouTube, Docs, Android, Doubleclick, and other services to make increasingly large contributions to the bottom line going forward.”

Of these, perhaps the biggest opportunity for Google comes in the area of “measured marketing.” It is the “Holy Grail” in the advertising industry to deliver a message to “…the actual customer who wants to buy what you’re selling.” Put another way, it is the ability to calculate a return on investment for your ad, which many see as the pay-off of the digital age.

According to Techpoint, a state wide initiative based out of Indiana defined the phrase, measured marketing as “…a category of business in which companies use electronic means to gauge consumers’ response (or non-response) and other interaction, and then use that insight to shape management and marketing effectiveness.

Google’s move into smart phones with the purchase of Android in 2005, and now Google TV, a joint alliance announced in May of this year (using the Android O/S), are extrapolations of that idea—and a whole hearted attempt to “…deliver [an advertiser’s] message to one in a million” (…borrowing from themeasuredmktg.com web site.)

Apple too has figured this out and recently announced iAds for it’s Apps independent software developers (ISDs). Steve Jobs recently said the company would split ad revenue with ISDs 60/40 in order to provide them with a continuing revenue stream, so they can continue to create great applications for Apple products. Apple’s new iTV initiative has also just begun and will ship a new set top box this quarter, according to the company.

So, even though both companies are starting out on the small screen, the long term goal is the living room TV and delivering this measured marketing technology with its pinpoint sharp advertising to viewers, and the valuable feedback to those paying for the content. And, the economics of free content once again will blossom.

What will it take to make a company with a $1T market cap? From what we have observed in both these companies, it’s a steadfast vision of the future, with the courage and confidence to act, and thus create it.