Presently, Apple's iPhone businesses is its biggest revenue stream, netting the company $47 billion in 2011 sales and growing at a 90% two-year compounded rate. Google's earnings via Android pale in comparison in spite of its market share lead.
Yet, signs already point to the fact that Android could compete against the iOS head-to-head. While Android's taken the OS lead, some of its handset users like HTC and Samsung are challenging the proliferation of Apple's iPhone.
"In the high end smartphone market it's about the operating system, not the hardware. Without the Android operating system, I don't think HTC or Samsung would have had the same success in smartphones," says Michael Genovese an analyst at MKM Partners.
The data supports Android's competitiveness. As
has lost its top spot in smartphone handset sales in 2011 and Blackberry withers, Android-dependent handset makers like Samsung, Motorola Mobility and HTC that have ascended, not Apple.
Ultimately, Google's Android strategy may be driven by its realm of options as a result of patent litigation threats. An industry newborn compared to the likes of Apple and Microsoft who own 35,706 and 78,555 patents respectively, Google holds just 4,613 patents, according to Goldman Sachs calculations. With Motorola Mobility, Google's patents would rise to 22,113 - potentially including key patents to keep litigation at bay.
A recent lawsuit indicates the benefit of Motorola Mobility patents. After being on the defensive since 2010, in September, HTC brought patent infringement claims against Apple using intellectual property claims picked up by Google in its Motorola Mobility purchase. Such litigation signals that Google may be correct in focusing on warding off IP litigation, even if it costs the company a shot against Apple.
About whether an iPhone challenge would be possible for Google, Noll of Stanford says it would be fine if, "Google was not under siege in the war of the trivial patents."
For now, Google is intent on fighting the patent war against Apple, instead of a smartphone revenue war. Still to be seen is whether Google will prevail. A common fear is that competition authorities will conflate Google's dominant search business with its nascent Android-fueled mobile search business.
"If there is a danger, it is that the [European Commission] is primed to be suspicious of all things Google... Hopefully [they] understand the difference between a search engine and smartphone operating system software," says Mark Lemley of Stanford Law School, who represents Google on separate suits and doesn't speak for the company.
If regulators use language that questions the deal in light of Google's search business, which it holds an over 80% market share, it may be a signal to Motorola Mobility shareholders that all bets are off. Handset maker defections to competitors like Microsoft may be another clue.
-- Written by Antoine Gara in New York
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