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

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

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 17,279.74 +13.75 0.08%
S&P 500 2,010.40 -0.96 -0.05%
NASDAQ 4,579.7890 -13.6380 -0.30%

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