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Google – Motorola vs. Microsoft – Nokia: Utter Failure vs. Smart Acquisition? Explanations.
Google – Motorola vs.
Microsoft – Nokia
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 users.
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 revenues.
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.
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 billion. It
was the company’s 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
‘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 Mobility’s 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 Mobility’s full commitment to the Android operating
system means there is 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 property’.
On September 3rd, 2013 Microsoft
acquired “acquire substantially all of Nokia’s 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 functions”.
Microsoft also explained why they decided to buy
Nokia’s devices & services business:
‘Under the terms of the
agreement, Microsoft will pay EUR 3.79 billion to purchase substantially all of
Nokia’s Devices & Services business, and EUR 1.65 billion to license
Nokia’s 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 Nokia’s shareholders, regulatory approvals and other closing
conditions. Building on the partnership with Nokia announced in February 2011
and the increasing success of Nokia’s 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 businesses’.
As I already mentioned two times, Microsoft ‘only’
bought Nokia’s 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 company’s annual revenue .Nokia’s 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 scratch’.
Microsoft’s rationale for buying these Nokia’s
Devices & Services business was also explained in a PowerPoint presentation
(what else!) . In the intellectual
property (IP) context, two slides describe and detail why these intangible
assets, more precisely patents, are important elements of the smart devices
Although Google has admitted to focusing more on innovation than
patent protection, let’s be honest, the only reason why Google bought Motorola
was for the patent parts. It’s a non-negligible portfolio of 17,000 patents
with many of which are directly applicable to mobile technologies.
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 US.
The Company also has been granted a ten-year license to use the Nokia brand on
Besides the number of patents, what’s the difference then? Florian Mueller
(FOSS Patents )
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 place”.
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 Apple .
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
‘[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’.
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 duopoly’.
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 that’s 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 software . Will
Microsoft really have the most cost-effective patent arrangements for smart
devices? Only time will tell whether they made the right decision.
Fresh and interesting article posted by WIPR concerning a European patent for a "device for preparing a drink extracted from a capsule", owned by Ethical Coffee Company (ECC). As you all know, Nespresso machines brew espresso from coffee capsules, a type of pre-apportioned single-use container of ground coffee and flavorings. In the case at hand, ECC, a Swiss Company, also creating capsules compatible with Nespresso machines, is suing Nestlé, in Paris, for alleged patent infringement. In other words, ECC is not happy with the way Nestlé modified the Nespresso machines back in 2010, keeping competitors’ capsules out of them and, more importantly, violating the patented "harpoon mechanism".
Fresh and interesting article posted on the IPKat about patent trolls/PAE/NPE and how the U.S. is willing (trying?) to tackle them.
"At 6:30AM the planes started taking off from San Jose's airport. Turns out the hotel is in a flight path. Win. Normally, this would have woken the AmeriKat but she was already wide awake. Was it the thrill of turning a year older? Unlikely. Was it the jet lag? Maybe. Was it the excitement of being in a valley so inundated with innovation you can't swing a Kat without hitting a patent? Most definitely. January is almost always an incredibly bleak month in northern Europe (weather wise). Cold, dark, rainy and miserable. So the AmeriKat has decided to perk up her whiskers by taking a dose of California sun and American innovative spirit by relocating to Silicon Valley where she reports on the latest goings-on in the world of US patent litigation.
Much ado about the patent troll problem: Earlier this month, an analysis…