August 2011

[Commentary] Busted. That's what we in the news media are in the matter of the presidential campaign of Rep. Ron Paul (R-TX).

Famous and not so famous critics have pointed out in the past day that journalists for the most part have ignored Rep Paul even when he succeeds at a level other Republican presidential candidates haven't. As far as many political reporters have been concerned, the congressman might as well be wearing one of those Harry Potter invisibility cloaks. He's there but we apparently can't see him. For instance, despite putting in a strong second place showing in the Ames Straw Poll in Iowa and polling consistently well in polls of voters nationally or in caucus and primary states, the 74-year old Libertarian was mostly ignored. The leading reason has to be because most journalists accept the conventional wisdom that Paul can't get Republican nomination. A number of his views just don't line up well with GOP orthodoxy. And that's true despite how some of his fiscal views anticipated the arrival of the Tea Party.

Google made a cannonball dive into a field it's long been edging toward: the mobile communications market. Pending regulatory approval, Google's arsenal now includes Motorola (MMI), Android, Google Voice, a fiber optic cable infrastructure, an Internet phone service and experience in the mobile retail markets. It's also got more than $26 billion in cash left over, in case it wants to go buy another arrow for its mobile quiver.

Could Google buy Sprint? Sprint's market cap has fallen to just $10 billion -- down 15% so far this year. Google could probably afford to buy the struggling carrier with cash, even after the Motorola deal closes. Google relies on the established carriers to sell and support its devices. But if Google could have the ability to deal directly with its customers, why not cut out the middleman? Though analysts widely believe Google's mobile ambitions are strong, few think Google would actually try to become a wireless carrier anytime in the near future. The infrastructure needed to carry signals around the globe is incredibly expensive, reducing the profit margins of wireless companies to next-to-nothing. "If you look at the margins Google enjoys compared to the margins carriers enjoy, why would you ever want to trade one for another?" asked Charles Golvin, analyst with Forrester Research. "Also, you can't be a carrier with just one device. It would create questionable competitive dynamics." Then again, no one thought Google would want to buy up a handset manufacturer -- or launch a head-to-head assault on Facebook, as it did with Google+. Four months into Larry Page's tenure as CEO, he's already proven he's not afraid to make high-stakes bets.

[Commentary] As far as explosive developments in the world of technology go, Google’s $12.5 billion deal for Motorola’s Mobility business is tantamount to detonating a nuclear bomb ... a big one.

Ownership of that company will hand Google substantial businesses that it has previously flirted with but never committed to. Notably, the business of producing and selling its own hardware for smartphones and tablets, and the not-insignificant side business of manufacturing and designing TV set-top boxes used by cable providers. But there are bigger questions here. Google licenses the Android operating system to phone-making partners such as Samsung, HTC and LG; how can Google turn around and compete with those companies? How will Google manufacture smartphones with Motorola while providing the newest innovations to partners that are now its rivals? And why exactly does Google — until now, a purely Web- and software-focused company — want to be in the hardware business? Google will undoubtedly see advantages in using Motorola’s expertise to design hardware and software side by side. And Google will need to hold its market position against Apple’s tightly integrated devices and services, as well as the new partnership between Microsoft and Nokia. The landscape of the mobile industry is quickly becoming all about that synergy of hardware and software. Can Google ignore the trend?

Google just plunked down $12.5 billion for Motorola Mobility. Would the deal have been cheaper if Big G had just purchased a handset maker back in January 2010 rather than launching the ill-fated Nexus One instead?

Buying Motorola Mobility makes Google a truer copy of the Apple business model. No longer a hands-off software provider with no financial interest in handset sales, Google now needs to worry about hardware implementation and direct profits. This two-headed beast will deliver the purest Android experience on the market, and will be held up as a role model or pariah when things go right or very wrong for the platform. And let's not forget that Motorola Mobility might not go home with Google after all. Perhaps the biggest reason to pick up Motorola rather than just buying another basket of protective patents is that regulators might block a pure patent deal but could let this agreement pass because Google is buying hardware operations where it holds no monopoly whatsoever. That doesn't make it a slam-dunk, however. All told, leaving Motorola on the table for a year and a half added at least $6 billion to the dollar cost but also brought about a slew of less obvious costs -- and benefits. For better or worse, Android just changed in a big way. And if Google had made this move a year ago, the market would look very different today in that unpredictable way that makes hurricanes out of fluttering butterfly wings.