EC gives green light to Google’s Motorola takeover

The European Commission (EC) has given the go-ahead to Google’s proposed acquisition of Motorola Mobility. It said that the deal “would not significantly modify the market situation in respect of operating systems and patents for these devices.”

The EC said that its primary concern was whether Google would try to prevent Motorola’s competitors from using its Android operating system. However, it found that given Google’s core business model is to push its online and mobile services and software to the widest possible audience. Android helps to drive the spread of Google’s other services, and it is unlikely that Google would restrict the use of Android solely to Motorola, which is a “minor player” compared to Samsung and HTC, according to the EC.

“We have approved the acquisition of Motorola Mobility by Google because, upon careful examination, this transaction does not itself raise competition issues,” said Joaquín Almunia, Commission Vice President in charge of competition policy. He added that the EC will continue to keep a close eye on all market players in the sector, with particular focus on the increasingly strategic use of patents.

The EC also examined whether Google would be in a position to use Motorola’s patents to obtain preferential treatment for its services, including search and advertising, but found that it already has many ways in which to incentivise customers to take up its services and that the acquisition of Motorola would not materially change this. Andy Rubin, senior vice president of Mobile at Google and one of the creators of the Android platform said that the firm’s vision for Android is unchanged and that Google remains committed to Android as an open platform and a vibrant open source community. “We will continue to work with all of our valued Android partners to develop and distribute innovative Android-powered devices,” he said.

However, Malik Saadi, principal analyst at Informa Telecoms & Media, noted that smartphone players are seeing the “vertical ecosystem”, where a vendor has control or influence over both the software and hardware side of their devices, as a kind of holy grail.

“Apple has been very successful in building a vertical ecosystem, where all of the elements in the iOS ecosystem are controlled by Apple. Every player in the industry is trying to mimic that because it is successful. Microsoft is increasingly working in collaboration with Nokia, and Samsung is trying to put Bada and Tizen as the third horse in the smartphone race,” he said.

“But that type of ecosystem will only work for high end segments, it will not work in the mass market. Different consumers have different lifestyles and different levels of disposable income, and you cannot address that with one unique vertical ecosystem.”

He added that the key reason Google bid to acquire Motorola is, as well as its patent portfolio, its ability to experiment with hardware and share its findings with Android hardware partners.

“I believe that Motorola will serve as a good practice lab for Google, to show partners how Android should be effectively implemented. In the near term, Idon’t think Google has any intention to get into hardware, but that could change in long term,” he added.

For the third quarter of 2011, Motorola reported net revenues of $3.3bn, up 11 per cent from the same quarter in 2010. Net loss for the quarter shrank slightly, to $32m, down from $34m a year ago.

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