Looking back, it was really just a matter of time. Last year’s acquisition of Motorola Mobility, for $40 a share, totaling a cool $12.5 billion, was a watershed moment for Google Inc (NASDAQ:GOOG). Ostensibly, Google Inc (NASDAQ:GOOG)’s largest acquisition to date was completed to secure Motorola Mobility’s 17,000 patents, along with another 7,500 that were pending approval. The idea was the patents would ward off potential patent-related lawsuits.
But Google CEO Larry Page wasn’t fooling anyone; buying Motorola Mobility was a direct means to go after Apple Inc. (NASDAQ:AAPL) and Samsung in the lucrative U.S. smartphone OEM market. Google Inc (NASDAQ:GOOG)’s partnership with LG has already produced a Nexus smartphone, and Motorola has some, too, but that’s so un-Google. If we’ve learned anything over the past couple of years, it’s that Google isn’t afraid to aggressively enter new markets with guns blazing: Google Fiber, the use of white space for wireless connectivity, self-driving cars, Glass — the list goes on and on.
So, when is Google Inc (NASDAQ:GOOG) — via its Motorola Mobility unit — going to get to work manufacturing its own high-end smartphone, and get serious about taking on Apple? Turns out, that time is nearly here.
Get ready for Moto X
Motorola has a suite of smartphone alternatives, of course; its RAZR phone was once a cutting-edge mobile device. But as Apple’s iPhone and Samsung’s Galaxy line of phones hit the streets, Motorola’s share of the domestic smartphone pie continued to shrink — down to an 8.5% market share in March of this year, from 9.1% the end of 2012. Google doesn’t take losing lightly. The answer? Step up to the plate with its own premium Motorola Mobility phone, manufactured right here in the U.S.
As we learned through an interview with Motorola Mobility CEO Dennis Woodside at the All Things Digital conference, the manufacturing of the Moto X phone — which will sport a new design, using two batteries to save power, and possibly incorporate sensors to predict users’ needs — will be outsourced, but it’s Google Inc (NASDAQ:GOOG)-backed Motorola Mobility, through and through. As Woodside put it, “We’re trying to bring Motorola back to its roots.” And maximize the $12.5 billion purchase price, while at the same time going after Apple Inc. (NASDAQ:AAPL)’s share of the domestic smartphone market? You can bet on that.
The target date for rolling out the Moto X is this October and, like Apple and its iMacs, Moto X will be made in the USA — just outside Fort Worth, Texas, to be precise. Moto X will generate about 2,000 local jobs, too.
Google is also exploring ways to incorporate cutting-edge technologies into its Moto X smartphone, including electronic tattoos and wearable devices to confirm a Moto X user’s identity. As Google continues to push the envelope, and combines its drive for innovation with taking ownership of its own OEM devices, who knows where its smartphone will end and an all-in-one mobile device begin? A lack of innovation has been mentioned time and again as one reason Apple Inc. (NASDAQ:AAPL)’s share price has declined so dramatically lately. That’s not likely to be a problem for a Google-driven Motorola Mobility device.
Unseating Apple in the U.S. isn’t going to happen overnight, if it happens at all. With 39% of the domestic smartphone market as of Q1 of 2013, Apple actually stretched its lead over Samsung (at least in the U.S.). Not surprisingly, Google’s Android continues to rule the OS roost, running 52% of all Americans’ smartphones in Q1. Google Inc (NASDAQ:GOOG)’s OS market domination, along with its willingness to push technology to new heights, bode well for Google’s latest foray. Maybe Page knew what he was doing when he plopped down $12.5 billion for Motorola Mobility, after all.
The article Does This Justify Google’s Motorola Mobility Acquisition? originally appeared on Fool.com and is written by Tim Brugger.
Fool contributor Tim Brugger has no position in any stocks mentioned. The Motley Fool recommends Apple and Google. The Motley Fool owns shares of Apple and Google.
Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.
