Danger on the Horizon for Google/Motorola and Microsoft


Google Inc. completed the purchase of cell phone mainstay Motorola Mobility, Inc. in its effort to stave off litigation and further dominate the smartphone landscape.  Additionally, Microsoft Corp. has declared that the forthcoming Windows 8 operating system will far outsell any of its prior platforms by a large margin. Lastly, smartphone market share numbers hold some surprises while mobile malware attacks are on the rise.

Focal Points:

  • Google has closed its acquisition of Motorola Mobility a little more than nine months after the $12.5 billion purchase was announced. The largest Google acquisition to date, and the company's first hardware purchase, Google is challenged to fix Motorola's ails – once the number two manufacturer –by launching exemplary Android-based smartphones and tablets.  In an effort to reassure other Android licensees that Motorola will not receive preferential treatment, the company will run Motorola as an independent subsidiary and has replaced Motorola CEO Sanjay Jha with a top Google advertising executive. Android has a 56 percent market share, up 20 percent from the same quarter last year, and outsold iOS-based devices by two to one. In related news, Microsoft has won a ruling from a regional court in Germany which found that Motorola infringed on one of its text messaging patents. Google acquired more than 17,000 patents in its Motorola acquisition; a major reason for the purchase. While Motorola Android sales in Germany are not immediately compromised, such a ban may occur if Motorola refuses to license Microsoft patents or if a higher court does not reverse the ruling.
  • Microsoft CEO Steve Ballmer, well-known for putting his foot into his mouth, has made the claim that the software giant will sell 500 million copies of Windows 8 by the end of 2013. The new operating system should hit the market sometime in October and will span PCs, smartphone, tablets and tablet domains. Windows 7, which runs only on PCs, has proven wildly successful for the company is on track to run on 350 million systems globally this year. That 12 month number is the same as was sold in the first 18 months after Windows 7's launch, thus, the company will need to improve upon initial Windows 7 sales by more than 71 percent over 15 months to match Ballmer's target. Though global PC shipments have waned a bit, industry trackers believe 400 million PCs will ship globally in 2013. Take rates on Windows tablets are unknown; however, the Apple iPad retains more than 95 percent of the market given its ease of use and mature ecosystem. Microsoft's Windows Phones have been notoriously slow as a mere 2.8 million were moved in the first quarter of this year. That represents a 1.9 percent market share, a 27 percent drop from the 2.6 percent achieved previous year.
  • The road Microsoft faces in attaining widespread adoption of its forthcoming Windows 8 operating system on smartphones is even more daunting than one would think. IT shipment reports unsurprisingly demonstrate that Android and iOS jointly account for around 80 percent of new smartphone shipments. The Nokia Corp.-abandoned Symbian operating system places third, Research in Motion Ltd.'s BlackBerry OS comes in at number four, and Samsung Electronics' Linux-based Bada operating system command larger shares of the market than Microsoft's current smartphone platform. Elsewhere, Intel Corp.'s McAfee software arm reports that mobile malware exploded during the first quarter. Android remains the most targeted mobile platform by a large margin and new threats targeting backdoor attacks bloomed while premium-rate SMS malware remains an ever-popular attack vector.

Experton Group POV: Motorola has a chance to flourish under Google control; however, the oft-touted marriage benefits of the company's large patent portfolio may indeed prove to be the only value to the Google. The merger has even less in common than the Hewlett-Packard Co./Palm combination, and in that case, HP had extensive experience managing hardware development and production complexities. Motorola pushes forward without a clearly defined path, a new executive lacking in hardware experience, and hardware development partners that could soon get skittish on Android usage. Google is taking a big risk with this purchase and it may not work to their advantage on either the hardware or software fronts.

IT executives may find smartphone OS choices shifting away from Android and towards other platforms if Google is unable to improve Android security, promote and enforce consistency across platforms, and maintain positive relationships with hardware partners. While it would be nice if Motorola could regain its former glory while moving its hardware business into the black, this is far less important to Android's future than the issues that have plagued the platform for years. Ballmer’s 500 million Windows 8 devices by the end of 2013 is not only unlikely, it is hard to believe it is even possible. As with all first revision offerings, enterprises are advised to wait out Windows 8 deployments for at least one year while the initial issues in radically redesigned platform are addressed. Moreover, the disjointed nature of the new touch-based Metro UI interface oddly juxtaposed with the traditional Windows schema is odd and Experton Group believes will be substantially reworked via service packs to speed slow customer adoption rates. The smartphone and tablet markets remain an uphill battle for Microsoft, and while Metro works well in these applications, a Windows 8 backlash coupled with a fragile and still-developing app ecosystem may stymie sales. IT executives are advised to take a "wait and see" approach to Windows 8 in all its incarnations.