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Motorola
vs.
Microsoft
Nokia:
Utter
Failure
vs.
Smart
Acquisition?
Explanations.
Thomas
Dubuisson,
LL.M,
J.D.,
LL.B
http://www.d-is-freshinteresting.blogspot.com/
tom.dubuisson@gmail.com-
Follow
me:
@tdubuisson
I. The
Parties
Google's
innovative
search
technologies
connect
millions
of
people
around
the
world
with
information
every
day.
Founded
in
1998
by
Stanford
Ph.D.
students
Larry
Page
and
Sergey
Brin,
Google
today
is
a
top
web
property
in
all
major
global
markets.
Google's
targeted
advertising
program
provides
businesses
of
all
sizes
with
measurable
results,
while
enhancing
the
overall
web
experience
for
users1.
Microsoft
is
an
American
multinational
software
corporation
that
develops,
manufactures,
licenses,
and
supports
a
wide
range
of
products
and
services
related
to
computing.
The
company
was
founded
by
Bill
Gates
and
Paul
Allen
on
April
4,
1975.
Microsoft
is
the
world's
largest
software
maker
measured
by
revenues2.
At
Microsoft,
they're
motivated
and
inspired
every
day
by
how
our
customers
use
their
software
to
find
creative
solutions
to
business
problems,
develop
breakthrough
ideas,
and
stay
connected
to
what's
most
important
to
them.
II. The
Acquisitions
On
August
12,
2011
Google
Inc.
(NASDAQ:
GOOG)
and
Motorola
Mobility
Holdings,
Inc.
(NYSE:
MMI)
announced
that
they
have
entered
into
a
definitive
agreement
under
which
Google
will
acquire
Motorola
Mobility
for
$40.00
per
share
in
cash,
or
a
total
of
about
$12.5
billion3.
It
was
the
companys
biggest
deal
ever,
far
exceeding
previous
big
buys
like
YouTube
for
$1.7
billion
and
DoubleClick
for
$3.1
billion.
Google
clearly
explains
on
its
website
why
they
decided
to
buy
Motorola
Mobility:
Google
and
Motorola
Mobility
together
will
accelerate
innovation
and
choice
in
mobile
computing.
Consumers
will
get
better
phones
at
lower
prices
[for
instance,
the
Moto
X
is
coming
very
soon].
Motorola
Mobilitys
patent
portfolio
will
help
protect
the
Android
ecosystem
(emphasis
added).
Android,
which
is
open-source
software,
is
vital
to
competition
in
the
mobile
device
space,
ensuring
hardware
manufacturers,
mobile
phone
carriers,
applications
developers
and
consumers
all
have
choice.
Motorola
Mobilitys
full
commitment
to
the
Android
operating
system
means
there
is
1
http://investor.google.com/releases/2011/0815.html
2
http://www.microsoft.com/about/companyinformation/en/us/default.aspx
http://en.wikipedia.org/wiki/Microsoft
3
http://investor.google.com/releases/2011/0815.html
and
a
natural
fit
between
our
companies.
Google
is
great
at
software;
Motorola
Mobility
is
great
at
devices.
The
combination
of
the
two
makes
sense
and
will
enable
faster
innovation.
Motorola
Mobility
has
a
long
history
of
innovation
in
communications
technology
and
the
development
of
intellectual
property4.
On
September
3rd,
2013
Microsoft
acquired
acquire
substantially
all
of
Nokias
Devices
and
Services
business,
including
the
Mobile
Phones
and
Smart
Devices
business
units
as
well
as
an
industry-leading
design
team,
operations
including
all
Nokia
Devices
&
Services-related
production
facilities,
Devices
&
Services-related
sales
and
marketing
activities,
and
related
support
functions5.
Microsoft
also
explained
why
they
decided
to
buy
Nokias
devices
&
services
business:
Under
the
terms
of
the
agreement,
Microsoft
will
pay
EUR
3.79
billion
to
purchase
substantially
all
of
Nokias
Devices
&
Services
business,
and
EUR
1.65
billion
to
license
Nokias
patents,
for
a
total
transaction
price
of
EUR
5.44
billion
in
cash.
Microsoft
will
draw
upon
its
overseas
cash
resources
to
fund
the
transaction.
The
transaction
is
expected
to
close
in
the
first
quarter
of
2014,
subject
to
approval
by
Nokias
shareholders,
regulatory
approvals
and
other
closing
conditions.
Building
on
the
partnership
with
Nokia
announced
in
February
2011
and
the
increasing
success
of
Nokias
Lumia
smartphones,
Microsoft
aims
to
accelerate
the
growth
of
its
share
and
profit
in
mobile
devices
through
faster
innovation,
increased
synergies,
and
unified
branding
and
marketing.
For
Nokia,
this
transaction
is
expected
to
be
significantly
accretive
to
earnings,
strengthen
its
financial
position,
and
provide
a
solid
basis
for
future
investment
in
its
continuing
businesses6.
As
I
already
mentioned
two
times,
Microsoft
only
bought
Nokias
devices
&
services
business;
not
the
entire
Nokia
Company
(I
lately
read
some
mistakes
on
the
internet).
Nokia
still
has
two
major
and
important
businesses:
networking
and
mapping.
In
fact,
Nokia
networking
business,
which
includes
equipment
it
sells
to
telecom
operators
to
run
their
wireless
networks,
brings
in
the
majority
of
the
companys
annual
revenue7.
Nokias
maps
technology
has
a
valuable
global
database
of
geographical
information.
It
provides
GPS
services
to
dashboard
navigation
systems
in
many
car
models.
The
unit,
which
generates
around
$1.3
billion
in
annual
revenue,
plans
to
sell
GPS
and
entertainment
services
to
companies
that
do
not
want
to
build
them
from
scratch8.
Microsofts
rationale
for
buying
these
Nokias
Devices
&
Services
business
was
also
explained
in
a
PowerPoint
presentation
(what
else!)9 .
In
the
intellectual
property
(IP)
4
http://www.google.com/press/motorola/
5
http://allthingsd.com/20130902/microsoft-explains-the-rationale-behind-the-nokia-deal/
6
http://www.businessinsider.com/microsoft-buys-nokia-devices-2013-9
7
http://www.nytimes.com/2013/09/04/technology/shedding-handsets-nokia-looks-to-the-future.html
8
Id.
9
You
can
find
the
presentation
(strategic
rationale)
http://www.docstoc.com/docs/160532498/StrategicRationale
at:
context, two slides describe and detail why these intangible assets, more precisely patents, are important elements of the smart devices business:
III.
The Comparison
Although
Google
has
admitted
to
focusing
more
on
innovation
than
patent
protection,
lets
be
honest,
the
only
reason
why
Google
bought
Motorola
was
for
the
patent
parts.
Its
a
non- negligible
portfolio
of
17,000
patents
with
many
of
which
are
directly
applicable
to
mobile
technologies10.
Microsoft
just
acquired
over
8500
design
patents
but
not
Nokia's
utility
(technical)
patents;
in
other
words,
a
25-year
registered
monopoly
right
which
describes
a
new,
original
and
ornamental
design
for
a
manufactured
object,
broadly
half-way
between
a
patent
and
a
copyright.
They
are
called
registered
designs
in
Europe
and
most
parts
of
the
world,
but
design
patents
in
the
US11.
The
Company
also
has
been
granted
a
ten-year
license
to
use
the
Nokia
brand
on
feature
phones.
Besides
the
number
of
patents,
whats
the
difference
then?
Florian
Mueller
(FOSS
Patents12)
intellectual
property
expert
describes
the
situation
as
follows:
the
whole
idea
of
the
Google- Motorola
deal
was
to
buy
patents
in
order
to
sue
others
over
them,
hoping
that
this
would
bring
about
a
stalemate
--
a
strategy
that
has
been
an
utter
failure.
Compare
this
to
Microsoft's
focus
on
licensing
patents
in
order
to
avoid
litigation
from
being
brought
in
the
first
place13.
As
you
know,
the
value
of
intellectual
property
rights
is
dependent
on
the
possibility
of
enforcement.
As
explained
by
Mr.
Mueller,
there
are
two
ways
in
which
you
can
leverage
out
of
a
patent
portfolio:
To
obtain
injunctions
(the
most
important
one)
To
seek
monetary
compensation
After
almost
three
years
of
litigation,
Google-Motorola
has
won
zero
enforceable
injunctions
against
Microsoft
and
it
just
lost
the
only
injunction
it
has
been
enforcing
recently
against
Apple14.
In
other
words,
Google
completely
overpaid
for
Motorola's
patents
and,
at
this
point,
probably
wasted
a
lot
of
money.
Another
difference
pointed
in
this
article
was
that
the
"Googlorola"
break-up
fee
was
$2.5
billion,
reflecting
desperation
as
well
as
concerns
over
antitrust
approval.
By
contrast,
Microsoft's
announcement
said
that
[t]he
transaction
is
subject
to
potential
purchase
price
adjustments,
protecting
both
Nokia
and
Microsoft,
and
a
USD
750
million
termination
fee
payable
by
Microsoft
to
Nokia
in
the
event
that
the
transaction
fails
to
receive
necessary
regulatory
clearances.
10
http://www.digitaltrends.com/mobile/is-googles-acquisition-of-motorola-working-out/
11
http://www.bbc.co.uk/news/technology-23673385
12
http://www.fosspatents.com/
13
http://www.fosspatents.com/2013/09/microsoft-nokia-deal-results-in-cost.html
14
Id.
This is a pretty standard level for such a fee, especially relative to deal size, while, compared to transaction value as well as in absolute terms, the Google-Motorola fee was extraordinarily high. There can be no doubt that today's deal is one of the most pro- competitive M&A deals in the history of the information and communications technology industry: consumers, wireless carriers, app developers and other stakeholders don't want the smartphone business to become a duopoly15. IV. The Conclusion Two years ago, before the deal with Motorola, Google Inc. owned hardly any patents. Today, with a portfolio of more than 17,000 patents, the situation is not really different. At this point, Google-Motorola has won zero enforceable injunctions against Microsoft and Apple. We never know what tomorrow brings, but thats not really promising for the future. On the contrary, before the deal, Microsoft already had an extremely strong patent portfolio. Now, with an addition of 8500 design patents, Microsoft just demonstrated that the Company is increasing its commitment to the mobile devices and services business; that it will make hardware along with the software16. Will Microsoft really have the most cost- effective patent arrangements for smart devices? Only time will tell whether they made the right decision.
15 http://www.fosspatents.com/2013/09/165-billion-euro-patent-licensing.html 16 For some people, this transaction means that Windows is dead: Windows Is Dead, Google Killed It, available at: http://www.businessinsider.com/windows-is-dead-2013-9