Who are the losers in Google's $12.5B acquisition of Motorola?

You can chalk up yesterday's announcement of Google's $12.5 billion acquisition of Motorola Mobility as yet another major wireless deal that I never predicted would happen but in hindsight seems like an obvious fit.  

In case you need a refresh on yesterday's news, here are the basics: Google (NASDAQ:GOOG) will acquire Motorola Mobility (NYSE:MMI) for $12.5 billion in cash but will operate Motorola as a separate business, and Motorola will remain a licensee of Android. Android, meanwhile, will stay an open source platform and Google will be tasked with navigating the delicate balance between supporting its own business and catering to its other Android licensees.   

When announcing the deal, Google executives talked extensively about how the acquisition is as much about Motorola's patent portfolio as anything else, explaining that Motorola's patent portfolio will bolster Android's position against patent lawsuits.

In fact, a number of companies, including Apple (NASDAQ:AAPL) and Microsoft (NASDAQ:MSFT), have sued Android licensees for patent infringement.

Within minutes of the news, many analysts and industry watchers were already speculating that Microsoft might be a big winner in this deal because now Android licensees such as HTC, LG, Samsung and Sony Ericsson will be more likely to hedge their bets with Microsoft's Windows Phone 7 platform in the event Google plays favorites with Motorola.

However, this deal may not be all upside for Microsoft. If Google acquired Motorola to get access to Motorola's patent portfolio, as Google executives assert, Google will likely use those patents to protect Google licensees. And that could make OEMs such as HTC, Samsung and LG more likely to stick with Android as their favored operating system because they will be protected from potential patent litigation. If that situation occurs, then Microsoft might actually be a loser in this deal, since it won't be able to use patent lawsuits as a way to pry companies away from Android.

Which company stands to lose the most from Google's proposed acquisition of Motorola Mobility? -But I don't think Microsoft is the only potential loser in this deal. U.S. wireless operators may also have a few concerns about the long-term ramifications of Google owning a major OEM, particularly a U.S.-based OEM with deep ties to the operators.

Sure, Motorola has gone through some major upheaval during the past couple of years, but it has a very long history as a favored handset supplier to U.S. operators. Even before the company's bestselling RAZR of the mid-2000s, it was a popular device maker in the U.S., known for being a pioneer in cellular phones. And it was also known as a company that was willing to work hard for its operator partners.  

Will Motorola's relationship with the carriers remain intact? I guess it's not surprising that U.S. operators have been quiet on this deal: We asked operators of all sizes--Tier 1s, Tier 2s and Tier 3s--to comment on Google's acquisition of Motorola, but so far they have all declined to comment or did not respond to our inquiries.

I suspect operators are carefully weighing the pros and cons of this deal. They have always had a love-hate relationship with Google.  On one hand, the company has been a fierce opponent to operators on such hot-button topics as net neutrality, device tethering and open access. On the other hand, Google has also worked hard to forge a better relationship with carriers in order to get them to support Android. Indeed, Android forms the tip of the smartphone strategy of many smaller wireless carriers.

Will Google's acquisition of Motorola spark a shift in the device power structure? As a result of the deal, Google could start to assert much more control over Android devices, forcing operators to take a back seat when it comes to decisions regarding what applications will be embedded on the device, what user interface will be used or even what version of Android will be featured.

U.S. carriers certainly have good reasons to be concerned about this latest development on the device landscape. Consolidation often leads to a lack of options, and it can change the industry landscape in unpredictable ways. --Sue  

P.S. Clearly there are a lot of unanswered questions about this impending deal. The Fierce team is exploring all the angles. Here's a compilation of our coverage:

  • Google shields Android from patent lawyers with $12.5B Motorola Mobility deal
  • Report: Google would pay Motorola $2.5B if deal collapses
  • What does Google's Motorola acquisition mean for Nokia, RIM?
  • Nokia shares leap 15% on Google's acquisition of Motorola
  • Sound off: Experts weigh in on why Google purchased Motorola
  • What developers need to know about the Google/Motorola deal
  • Google to acquire Motorola Mobility, vows Android will remain open