This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Apple Forcing Google to Favor Motorola IP Over Android Profits

Stocks in this article: GOOGMMIAAPLMSFTRIMMORCLLPLHPQXOMNOK

NEW YORK ( TheStreet) - When Google (GOOG) took the patent Cold War in Silicon Valley to a new level with a $12.5 billion bid for Motorola Mobility (MMI) at an over 60% premium, shares rocketed to to near $40.

But deal-enriched Motorola Mobility shareholders should be wary of warnings signs from Google's regulators and customers that could cut those gains by half. In addition, its unclear whether the Motorola Mobility deal is a lost financial and competitive opportunity for Google.

"If for some reason the merger is disallowed, Motorola Mobility shares would probably trend back down to the low-$20s range where they were trading prior to the bid by Google," says Tavis McCourt of Morgan Keegan.

For Motorola Mobility investors, a Google merger fail might lead to a share slump because the company is unlikely to garner non-Google interest. In announcing its merger, the biggest in its history, Google acknowledged it would gain little from handset businesses acquired. Instead, Motorola Mobility's patents will allow Google to defend its growing Android ecosystem from intellectual property litigation by Microsoft (MSFT), Apple (AAPL) and potentially Oracle (ORCL). "Motorola also has a strong patent portfolio, which will help protect Android from anticompetitive threats from Microsoft, Apple and other s ," said Chief Executive Larry Page when announcing the deal.

If competition concerns were to force Google to withdraw its bid, others won't line up to buy Motorola Mobility. "If the deal doesn't go through, I don't see any obvious buyer as interest in the IP portfolio would be high but nobody would take the burden of the actual business as Google did," says Pierre Ferragu of Sanford C. Bernstein.

Large Motorola Mobility holders like activist investor Carl Icahn and Farallon Capital Management would take a big hit if the deal were to breakdown. See Carl Icahn's portfolio and 5 Key Players in the Mobile Payment Wars for more on Motorola Mobility and Google.

Potential competition concerns are indirect. Google's Android smartphone operating system is a tremendous success, so much so that the company gives it away and still makes money. Google open sources its operating system freely to handset makers like Samsung, LG (PL), HTC and Motorola Mobility in a push to drive Android adoption that will bolster revenue in adjacent search businesses.

In the U.S., Google's Android market share has more than doubled in a year as of the third quarter to 57%, according to data firm IDC. Meanwhile, Research In Motion's (RIMM) Blackberry has given up share and rollouts like HP's (HPQ) WebOS came to the market dead-on-arrival. Even Apple's (AAPL) iOS has lost share since 2010.

1 of 3

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,370.71 -9.70 -0.06%
S&P 500 1,886.76 +24.00 1.29%
NASDAQ 4,258.4380 +41.0480 0.97%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs