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Apple Forcing Google to Favor Motorola IP Over Android Profits

A key question will be whether buying Motorola Mobility will put Android at risk. Google unequivocally allayed the concern when announcing the deal. "We built Android as an open source platform and it will stay that way," said Page in August. Google has pledged it would continue licensing Android to Motorola as if it were any other customer, without exclusivity after the merger.

In offering Android for free, while competitors Apple and Microsoft keep theirs systems exclusive or charge for licenses, Google is driving Android growth charitably and without veering far from its search business. Google's open sourcing looks very much like the spawn of a "don't be evil" -driven company that's kept consumers loyal and regulators at bay as it's become the most dominant force on the Web.

With a growing number of smartphones on Android conducting Web browsing using its cornerstone search business, Google can generate revenue in adjacent businesses even as it open sources Android. Google reported annualized mobile search revenue from Android of $2.5 billion in the third quarter. Android-bolstered mobile searches may roughly double every year through 2014, according to Goldman Sachs estimates.

Still, Google is wise to protect Android, challenged by Apple via a 2010 suit against HTC and another by Microsoft in 2011. If patent concerns were to accelerate, it could push users off of Android - as recent announcements may indicate. About the impact of potential legal disputes on Android's handset prevalence, "we believe other handset manufacturers are likely to hedge their bets and start to increase the portion of [units] running on Windows Phone," wrote Goldman analysts in a September note.

It's why Google has made efforts like guaranteeing Android non-exclusivity to boost its Motorola Mobility deal odds.

Nevertheless, late on Monday, the European Commission said it would pause a review of Google's acquisition to wait for further documents from the Web giant. The news follows a September announcement from the Department of Justice that it will also scrutinize the merger. In response, Google wrote in a blog post at the time, "while this means we won't be closing right away, we're confident that the DOJ will conclude that the rapidly growing mobile ecosystem will remain highly competitive."

Legal scholars, analysts and investors who haven't sold shares in spite of regulatory deal scrutiny agree. "I see no valid antitrust argument against the acquisition," says Roger Noll of Stanford Law School.

If one were to grant Google its Motorola Mobility acquisition, it's still unclear that committing Android as an open platform is the best option. Apple faces stiff competition from Android and handset makers who carry it, but iOS exclusivity for iPhone handsets has helped the company eclipse ExxonMobil's (XOM - Get Report) market cap at times in 2011.
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