This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
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

The Big Question About Google's Motorola Acquisition

There is just one problem with this theory.

And that is that Google has said it's not happening. Google is saying that it won't integrate Motorola's Android businesses, but rather treat it as if it were "any" Android third party such as HTC or Samsung. It will deal with this business on an "arms-length" basis.

So what's the point? There is the worst kind of contradiction here. Google is saying is that it will run Motorola as a separate business because it doesn't want to annoy companies such as HTC and Samsung that compete with Motorola's Android devices.

If Google isn't integrating Motorola's Android business, then what's the point of owning it? Google might as well buy small minority shares in the open market of companies such as Dell (DELL), Hewlett-Packard (HPQ), HTC and Research In Motion.

But if Google spent $12 billion buying small minority stakes in Dell, HP, HTC and RIM in the open market, people would question Google's sanity and the stock would decline. People are not investing in Google in order for Google to be a passive investment fund.

In other words, Google owning Motorola's Android businesses but saying that it will "keep it separate" makes no sense. Either you integrate the business and compete directly with Apple and RIM on their own terms, or you get rid of Motorola's handset and tablet businesses. You can't have it both ways.

The theory here is that, these days, a hardware business is only worth anything anymore if it's integrated with the company owning the operating system.

If the hardware company only stamps out hardware fed to any and every company by an operating systems provider (such as Google and Microsoft (MSFT)), then you are basically only like Dell, HP or HTC, just to pick a few. You can try to compete with the Chinese in making hardware running Android or Microsoft Windows. Good luck!

Thus, Google's ownership of a Motorola Android business that is not integrated is a losing proposition that will generate low to nonexistent profits and serve as a drag on Google's stock.

Either Google divests the Motorola Android business or it integrates it. So far, Google's official story is to do neither. This is the big question for Google.

2 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

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
Stocks Under $10

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

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
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!
SYM TRADE IT LAST %CHG
AAPL $124.25 -0.14%
GOOG $542.45 -1.00%
FB $81.66 -0.67%
TSLA $187.51 -0.67%
YHOO $44.13 -0.69%

Markets

DOW 17,698.18 -77.94 -0.44%
S&P 500 2,059.69 -8.20 -0.40%
NASDAQ 4,880.2280 -20.6570 -0.42%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs