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Huge announcement if true, and if this accounts for the entirety of the Motorola purchase that Google made. That means that in less than two years, Google shre
by mediaman 13y ago
Huge announcement if true, and if this accounts for the entirety of the Motorola purchase that Google made.
That means that in less than two years, Google shredded 85% of the $13bn paid for Motorola. At the time, the high price paid was excused for the patents, because the business itself did not generate nearly enough earnings to justify the price. Now, if it is true that the patents are part of the deal (the article states they are), it's proof that these did not have nearly the value anticipated.
It's also a big statement on Google's ability to succeed in the hardware market, where they've never seemed to be able to gain real success despite their attempts with notebooks and phones.
Edit: the article states the deal would include more than 10,000 patents. Originally Motorola was estimated to have 17,000 patents at the time of its purchase by Google. So while this is still speculation, and we do not know full details, there's a good chance Google may have cherry-picked the patents they felt were important to retain.
Follow-up edit: the 10,000 patent number comes from this article:
http://usa.chinadaily.com.cn/2014-01/30/content_17265533.htm http://usa.chinadaily.com.cn/2014-01/30/content_17265533.htm
Edit 3: The value destruction here isn't so bad as 85%. See Magicalist's comment below for a good summary - Google picked up a lot of cash, tax loss assets, and $2.2bn from the sale of one of Motorola's subsidiary businesses as part of that $13bn original purchase price. Still a loss but not as dramatic as the headline number.
- lotso 13y ago> It's also a big statement on Google's ability to succeed in the hardware market, where they've never seemed to be able to gain real success despite their attempts with notebooks and phones. And Google TV. Let's not forget that huge failure. "By the summer of 2012, the majority of the televisions you see in stores will have Google TV embedded in it." -Eric Schmidt
- mcphage 13y ago> "By the summer of 2012, the majority of the televisions you see in stores will have Google TV embedded in it." Still could happen. (checks calendar...) Nevermind, then.
- mediaman 13y agoIt makes me wonder how this will affect Google management's willingness to make additional attempts in hardware. For example, will they still push Google Glass? As you suggest, Google TV? Further out, they seem to be pursuing things like autonomous vehicles -- perhaps this could motivate them to limit their ambitions to the software/AI aspects of it.
- specialist 13y agoGoogle just bought Nest.
- ChikkaChiChi 13y agoA year off and the name is different, but Chromecast has redefined the way I think about 'Smart TVs' and HTPCs. Google's long game still looks good in this area, IMO.
- myko 13y agoYeah, Chromecast is pretty amazing. I bought one and everyone in my family who has been over to see it has purchased one as well.
- pgrote 13y agoWhat was their primary reason for getting one?
- myko 13y agoIn mine and my wife's parents cases, Netflix. They didn't even know such a service existed before though, or they might've had a different solution in place already. My sisters, Netflix and for my younger sister mainly YouTube and Google Music (which she rarely used before she got the Chromecast, as she has an iPhone and the app just came out for iOS).
- yetfeo 13y agoWhat are the advantages of Chromecast over something like Apple TV?
- ChikkaChiChi 13y agoI responded above, sorry :)
- adventured 13y agoTwo things. Price, and no lock-in to Apple's ecosystem.
- yetfeo 13y ago
- ceejayoz 13y ago> And Google TV. Let's not forget that huge failure. Not to mention http://en.wikipedia.org/wiki/Nexus_Q http://en.wikipedia.org/wiki/Nexus_Q
- notJim 13y agoI dunno, the Q was pretty brilliant as a piece of performance art.
- eropple 13y agoI actually, non-ironically like having a Nexus Q, if only as a conversation piece. The thing looks really cool.
- ben1040 13y agoConsidering they never actually exchanged money a single Q (the people who pre-ordered them wound up getting them free, as did I/O 2012 attendees), it doesn't seem to be so much of a failure as it was just market research on how to do it the next time. Notwithstanding the built-in amp, the Chromecast is a pretty narrow superset of the Q at least in terms of features.
- bruceboughton 13y agoConsidering they never actually exchanged money a single Q Seems like quite a failure for a business.
- eropple 13y agoExperiments don't always pan out and they avoided the PR hit of releasing a turd. If the Nexus Q was more than couch-cushion money I'd be surprised.
- adventured 13y agoInstead, by the Summer of 2016, the majority of living rooms will be using Chromecast or something similar running Android. Android will acquire a monopoly share in smart TV, exactly like it did in smart phones and tablets. In fact, the game is already over, the competition just doesn't realize it yet.
- benihana 13y ago>Android will acquire a monopoly share in smart TV, exactly like it did in smart phones and tablets. what.
- clarky07 13y agoperhaps, and Google still won't make a dime on it. incredible really.
- 72deluxe 13y agoIf they intend that, it is foolish. When you use a computer, you sit close to it to read. When you use a tablet, you sit close to it. When you use a TV, it is far away. Yet TV manufacturers seem to think that you want to read on it. It is far away. Seems daft to me.
- jotm 13y agoSmart TVs aren't a failure yet - I hope Google keeps their plans going. It'll be pretty much like Microsoft's Xbox...
- dclara 13y agoI got confused by you mixing smart TV with Xbox. I still think Smart TV concept and architecture is pretty failed from the market. From SetTopBox to Apple TV to Google TV, whenever I saw there is a box attached to the TV which can receive the TV program from the internet, it looks so weird to me. Maybe that's why it's not popular. Eventually we need to get the TV be real smart and be controlled by the PC instead of smart phone which requires the Android to be embedded into the TV box in order to render the graphics.
- jotm 13y agoI meant it as a comparison to how the Xbox was a failure for a pretty long time until it took off. TVs with the ability to show a calendar, play Angry Birds and browse Youtube make sense to me, it seems like a natural progression of the good old set top box. If these new TVs run Google's OS, the company will win sooner or later...
- dclara 13y agoI got your point now. So set top box, internet TV died. Now it's the time for smart TV which is controlled by the smart phone. I'm pretty tired about smart phone, too. If TV is controlled by PC, I can play internet game on it and watch movies with high quality, like in home theater without the high cost.
- Kudos 13y ago> Now, if it is true that the patents are part of the deal (the article states they are) It says "certain patents", which would suggest a minor amount.
- _delirium 13y agoWRT the patents, it depends on the details of the sale, and how/why Google valued them. Speculation was that one reason Google bought Motorola was to keep someone else from getting the patents and being able to use the patents against Google. If that was responsible for a large portion of the valuation, that might still be retained in a sale to Lenovo, depending on how precisely the sale is structured. It's fairly common in patent sales to include terms protecting the seller, so Lenovo would likely not be able to turn around and sue Google with the just-purchased patents. If so, Google would still retain the portion of the patents' value relating to them not being in the hands of someone who can sue Google using them.
- georgemcbay 13y agoI'd be shocked if Google doesn't get full access to use all the patents covered in the deal( assuming the reports are right and the patents are going to Lenovo), but even with that in mind a big part of the value of holding lots of patents in some technology area is (unfortunately) that you can use them as a nuclear option against someone who is suing you for some other patent to allow for MAD-style defense. IANAL but I'm not sure how they could structure a deal that gives away the patents but keeps that defensive option available.
- rst 13y agoFrom Google's official announcement[1], undersigned by Larry Page: "Google will retain the vast majority of Motorola’s patents, which we will continue to use to defend the entire Android ecosystem. " [1] http://googleblog.blogspot.com/2014/01/lenovo-to-acquire-motorola-mobility.html http://googleblog.blogspot.com/2014/01/lenovo-to-acquire-mot...
- IBM 13y agoMost of the patents have been pretty worthless so far. They are mostly standards essential patents that need to be licensed on FRAND terms and in the last 3 years they've had zero enforceable injunctions in their favor. Relevant: https://twitter.com/reckless/status/428653694998298624 https://twitter.com/reckless/status/428653694998298624
- deleted 13y ago[deleted]
- thurn 13y agoWasn't there some story about how Motorola represented billions of dollars tax savings from deferred tax credits? Is it potentially possible to sell the rest of the business while keeping those?
- CompleteMoron 13y agoI would wager that it means a ton of these patents arent useful anymore.. the stuff coming out of google X will pretty much make these old patents kinda uselesss. Even the very nature of the cell phone is rapidly changing and Google Glass is a useless halfstep with contacts coming right around the corner which will be the real hardware killer.
- lotso 13y ago>the stuff coming out of google X will pretty much make these old patents kinda uselesss. Why would the stuff coming out of Google X make patents related to cellphones useless?
- objclxt 13y ago...a lot of Motorola's patents are related to underlying voice and networking technologies. Unless Google X is proposing to come out with a replacement for GSM (...and it's not) that stuff isn't changing.
- CompleteMoron 13y agoGSM is over by 2017/2018 for carriers stateside. Where will the patents for these topologies and compression schemes be then? That is proverbially around the corner corporately.
- Aloha 13y agoI think your estimates are a bit optimistic - that aside - the GSM RAN will be going away, not the GSM core - that lives on for UMTS and LTE.
- ben1040 13y ago>Google shredded 85% of the $13bn paid for Motorola http://www.engadget.com/2013/04/17/arris-closes-deal-to-buy-motorola-home-cable-and-internet-biz-fr/ http://www.engadget.com/2013/04/17/arris-closes-deal-to-buy-... To be fair they got $2.2bn of it back by selling off Motorola's cable STB and modem business.
- jonathannorris 13y agoI believe Motorola also had $3B in cash when acquired.
- magicalist 13y agoYeah, I'm not sure how straightforward it all was, but according to this article: > At $12.5B, Motorola is Google’s largest acquisition to date. Google paid $40 / share in cash, but received ~$11 / share in cash and $8 / share in deferred tax assets. Thus the value ascribed to operations + patents was about $21 / share, or $6.3B, reflecting a multiple of ~0.5x sales and 12x EBITDA. Now adjusting this further for the $2.35B total consideration Google is expected to receive for the Motorola Home business, we get a purchase price of just under $4B for Motorola's handset business and patent portfolio (17K patents and 7.5K patent applications). http://www.zdnet.com/googles-motorola-purchase-was-it-worth-it-7000009356/ http://www.zdnet.com/googles-motorola-purchase-was-it-worth-... So it seems like it would end up being $1 billion for a bunch of patents. The whole process has been rather weird, in the end.
- kryptiskt 13y agoThey have also eaten large Motorola losses for quite a few quarters now. So it's not just the purchase price that is on the cost side.
- corresation 13y ago"That means that in less than two years, Google shredded 85% of the $13bn paid for Motorola" http://www.forbes.com/sites/timworstall/2012/12/22/did-motorola-mobility-only-cost-google-1-5-billion/ http://www.forbes.com/sites/timworstall/2012/12/22/did-motor... If this story is true, Google keeps accrued losses (you can't sell losses with a division). Add cash on hand, the sales of the STB business, and it's pretty far from $13 billion. By some accounting Google would still come out ahead. But I have trouble believing this story. Given recent initiatives at Motorola, the light seemed to be appearing at the end of the tunnel. As one aside, Lenova purportedly wanted to bid on Blackberry, but was blocked by the Canadian government for national security reasons.
- deleted 13y ago[deleted]
- graving 13y agoThis graph[1] tells some of the story, but the bigger story was they failed to capitalize on the patents, and even got fined by a jury for trying to abuse FRAND patents on WiFi and H.264. http://static1.businessinsider.com/image/52605103ecad0479335c44d0-960/chart-of-the-day-motorola-losses.jpg http://static1.businessinsider.com/image/52605103ecad0479335... http://m.computerworld.com/s/article/9242129/Microsoft_wins_jury_trial_in_patent_dispute_with_Motorola http://m.computerworld.com/s/article/9242129/Microsoft_wins_... Edit: The timing is very interesting too. Google reports its quarterly earnings tomorrow, and was known to have spent about $500M on advertizing the Moto X which hasn't been selling well and which must have dragged Google's earnings down. Releasing this news now will help calm investors tomorrow. Also, can't imagine that Lenovo will continue subsidizing the Moto X/Moto G, so I expect prices to go up once the acquisition completes.
- Someone 13y agoIncreasing the price of a phone that "hasn't been selling well"? Doesn't seem like a good tactic to me (if they currently sell them at a loss, it would be an improvement, but it would be more cutting your losses than being a success) Luckily, by the time the acquisition completes, those phones will be obsoleted by newer models ('completes' will take months, if not years)
- absherwin 13y agoThey shredded closer to a sixth of the initial price less whatever IP benefit they received. Motorola had ~$3B in cash when acquired. Google previously sold their set-top box unit for $2.35B and realized about $1.7B in tax benefits from previous losses. However since acquiring it has taken $1.038B in losses, which is $0.67B post-tax. There will be another write down for the lost goodwill less the value of the remaining IP that should be worth very approximately $1B. So including the $3B from Lenovo, they recouped approximately $10.4B of the initial $12.5B purchase price. Edit: Previous version excluded cash.
- harrychenca 13y agoI want to know how long it took you to gather all the figures? and Where you collect them? I am currently working on a platform that help people become better investors. I found your analysis amazingly informative and concise! Thanks!
- barkingcat 13y agoQuarterly and annual reports. The prospectus for the original sale. These are all public companies so the reports are on record. Before you start coding or starting a project on this kind of thing please read up on how a company goes public and the reporting requirements and where these things are filed. Also talk to someone in the industry and pick their brain. I'm in Canada and a requirement for even doing something like business reporting for media is a CSC certificate, which qualifies you for basic knowledge of the securities industry, how to read annual reports and ledgers. Please do the same type of research for the territories and/or countries that you are thinking of working in. It'll make your projecy more successful.
- barkingcat 13y agoFor example many of these types of documents are filed on sedar in Canada and on Edgar in the us. If these terms don't mean anything to you then you should read up on them.
- sumedh 13y ago
- deleted 13y ago[deleted]
- mathattack 13y agoA lot depends on the remaining 7,000 patents.
- w1ntermute 13y agoIt looks like Google used the Motorola patents to get Samsung to tone down its Android skinning: http://recode.net/2014/01/29/after-google-pressure-samsung-will-dial-back-android-tweaks-homegrown-apps/ http://recode.net/2014/01/29/after-google-pressure-samsung-w... If this keeps Android from being forked by Samsung, I'd say it's not such a big loss.
- yabatopia 13y agoPerhaps you can look at it from a different angle: Samsung made it very clear that they would continue to fork Android, unless Google stopped making smartphones and dropped Motorola. In a way Samsung has much more leverage over Android than Google.
- w1ntermute 13y agoGoogle should be picking another OEM (Lenovo?) and doing everything it can to push its sales, to create competition for Samsung. The whole point of Android was that by making the OS free software, it would neuter the OEMs, not give them the power to fork the OS.
- dba7dba 13y agoI agree. Think reason Rubin left Android team in Google was because google realized samsung had too much control and google wasn't happy with Rubin too much...
- hrvbr 13y agoIt is confirmed: http://investor.google.com/releases/2014/0129.html http://investor.google.com/releases/2014/0129.html
- bradleyjg 13y agoGoogle may not be able to keep all the tax losses. It was originally reported that google would save $700M a year through 2019.* I'm not sure that they those losses are severable from the rest of the company. * E.g. http://www.reuters.com/article/2011/08/31/us-motorolamobility-google-tax-idUSTRE77U1QX20110831 http://www.reuters.com/article/2011/08/31/us-motorolamobilit...
- absherwin 13y agoThere are two types of tax losses. There are those related to previous losses that Google captured on acquisition. The $700MM a year estimate relates to the anticipated future losses of Motorola. While Google is losing that benefit, it is by definition less than the amount lost! So it's not actually a benefit.
- piyush_soni 13y agoSeems surprising that they have to sell the whole Motorola division for less than they bought this little company Nest for.
- dragonwriter 13y ago> Seems surprising that they have to sell the whole Motorola division for less than they bought this little company Nest for. At the time of the Motorola acquisition, it was widely portrayed that they were buying the patent portfolio and that the rest of Motorola was largely dead weight that came along with the patent portfolio. Since they are keeping the patents (but giving Lenovo a license to them), it doesn't seem like that bad of a deal.
- kenesom1 13y agoNest is worth every penny. As for why Google specifically acquired them? Possibly because a general partner at KPCB (Nest's biggest investor and one of Google's early investors) also holds a seat on Google's board. Nest was one of Google Ventures largest investments and Google Ventures holds a seat on Nest's board. There's nothing like having the seller also be the one involved in the buying decision. Nest makes great products and has an awesome team. I think they're worth more than what Google paid.
- zavi 13y agoLenovo is getting 2,000 patents, not 10,000. http://investor.google.com/releases/2014/0129.html http://investor.google.com/releases/2014/0129.html
- dragonwriter 13y ago> Now, if it is true that the patents are part of the deal (the article states they are) The patents aren't being sold as part of the deal -- it's officially announced, and Google keeps the patents (or, at least, "the vast majority of" them) but Lenovo gets a license to them. [1] [1] http://motorola-blog.blogspot.com/2014/01/motorola-to-join-lenovo-to-create-truly.html http://motorola-blog.blogspot.com/2014/01/motorola-to-join-l...: "Google will maintain ownership of the vast majority of the Motorola Mobility patent portfolio, including current patent applications and invention disclosures. As part of its ongoing relationship with Google, Lenovo will receive a license to this rich portfolio of patents and other intellectual property. Additionally Lenovo will receive over 2,000 patent assets, as well as the Motorola Mobility brand and trademark portfolio."
- facepalm 13y agoIt says in paragraph 3: "Under this deal the search giant will keep the majority of Motorola's mobile patents, considered its prize assets." This is the silliest HN thread I have ever seen. All the time it was considered proof that Google is evil that they compete with other makers of Android handsets. People who like Google said from the beginning that Google was forced to buy Google because of the patent wars getting out of hand. Now that claim has been validated. I am really, really surprised by this HN thread. I've been on HN for 6 years and have never seen anything like it.
- goggles99 13y ago>That means that in less than two years, Google shredded 85% of the $13bn paid for Motorola. You did not even make it down to the third paragraph of the article? Under this deal the search giant will keep the majority of Motorola's mobile patents, considered its prize assets. SMH
- mediaman 13y agoYour condescension is unwarranted. This originally pointed to an earlier Reuters article on the deal prior to the later story. The later story contains information from the official Google statement. Prior to the official company statement, sources stated that up to 10,000 patents were being transferred to Lenovo in the deal, which is the majority of the 17,000 believed to be owned by Motorola Mobility. My comment you responded to reflects what was known at the time prior to official announcement of the deal. I understand it's often easiest to assume that those around you are stupid, especially on the Internet, but I would respectfully request that you at least consider alternatives to what may appear to you as stupidity, and temper your comments to reflect that possibility.
- qq66 13y agoEven if Google had to give Motorola away, the deal was good for them. The acquisition spurred a huge quality jump in the Android ecosystem and today Android outsells iOS by a 5-1 margin.
- igravious 13y agoI'm not sure if someone has said this but I think it was stupid for Google to get into the smartphone hardware business because it put them in direct competition with their partners. I bet you that all over the world management at HTC, LG, Samsung, Sony, Huawei, you name it, will be breathing a collective sigh of relief.
- vardhanw 13y ago85% loss on the deal? - No http://dealbook.nytimes.com/2014/01/29/did-google-really-lose-on-its-original-motorola-deal/ http://dealbook.nytimes.com/2014/01/29/did-google-really-los... .. considering 1. Motorola had cash on hand and tax credits worth $3B. 2. Google sold Motorola's STB business for $2.4B to Arris. 3. It valued the acquired Motorola patents at $5.5B. Considering #3 is overvalued by 100%, it still comes to a loss of about $2b. But the gains would not be just monetary as Google now has a patent portfolio to be a stronger player in the smartphones business, and has had a say in the organization of the smartphones hardware segment which it can leverage.