With Motorola gone, Google can focus on fixing Android

from cnn

NEW YORK (CNNMoney)

Google sold Motorola Mobility just a year and a half after buying it. On the surface, that seems like an admission of defeat.

But selling Motorola is less a confession that it messed up, and more a tacit admission that there's no real need for Google (GOOG, Fortune 500) to be making its own smartphones.

Software licenses and driving people to search are how Google makes money on mobile. Selling smartphones, by contrast, has been a perpetual money loser for Google.

When Google started designing "Nexus" brand smartphones in 2010, smartphones were still by and large mediocre. Google needed to create its own hardware to show manufacturers how a smartphone should look, feel, and perform. Though Nexus phones themselves never overwhelmed in the sales category, the overall mission succeeded: Every major manufacturer now makes at least one top-tier phone with excellent performance.

Realizing that practically any company can make a great smartphone now, Google is turning its attention to making sure the user experience on all of the top Android phones is spot on.

Related: Samsung's strategy is failing

That's something even the largest Android smartphone manufacturer, Samsung, has been struggling with. Software is now the major way for phone makers to differentiate their products. The problem for Google is that the best selling Android handsets have begun to de-emphasize Google's services, instead promoting the smartphone maker's often gimmicky services and apps.

Google's sale of Motorola is likely part of a plan to take back ownership of its Android operating system.

Russian blogger and analyst Eldar Murtazin claims that Google will abandon it's Nexus line of phone and tablets in 2015 and will instead focus on an effort to put its unvarnished Android software on popular devices, such as the Samsung Galaxy S4 and HTC One. Though Murtazin has a hit or miss record, a Re/Code report claiming Google is pressuring Samsung to abandon its custom Android software lends some credence to the notion.

Though Android's open-source nature gives smartphone makers tremendous freedom to make their phones' software unique, Google's default Android experience remains substantially better than anything else out there. Google needs to protect that. Google was never going to do that with Motorola or Nexus phones, which only comprised a very small percentage of overall Android smartphone sales.

Also by cutting ties with Motorola, Google is eliminating a source of tension with Android phone makers. Google can now restore any goodwill lost with its partners when it bought one of their rivals and get to work on making Android a better experience on all devices.

So it makes sense that Google is offloading Motorola (except for most of the patents and the research department). It makes sense that Google wants to focus on third-party hardware. It makes sense that Google wants more control of the user experience on Samsung phones.

That's because Google and Android smartphone makers aren't competing with each other as much as they're competing against a common foe: Apple (AAPL, Fortune 500). 

Google Failed at Smartphones. Can It Really Build Smart Homes and Robots?

from businessweek

By Joshua Brustein   January 30, 2014

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On the face of it, operating an existing cellphone company should be easier than creating and maintaining computerized eyeglasses, robots, and Internet-connected home appliances. Now that Google has admitted failure in the phone business by selling Motorola to Lenovo for about $3 billion, how credible are its chances to pull off its much more ambitious aspirations in hardware?

The company says the Motorola sale doesn’t mean it is throwing its hands up at making physical things. “This does not signal a larger shift for our other hardware efforts,” wrote Larry Page, the company’s chief executive, in a blog post announcing the Motorola deal. “The dynamics and maturity of the wearable and home markets, for example, are very different from that of the mobile industry. We’re excited by the opportunities to build amazing new products for users within these emerging ecosystems.”

In fairness, Google faced some tough barriers in the mobile business. Like Microsoft’s purchase of Nokia’s device operations last year, Google’s 2012 purchase of Motorola for $12.5 billion was a play to become more like Apple, selling smartphones as well as the software that powers them. But the incumbents may just be too strong. No attempt to ape Apple has borne much fruit, and Samsung sucks the rest of the air out of the smartphone market in most of the rest of the world. (The big exception is China, where local companies are humming along, but Google doesn’t exactly have a history of success there.)

The smartphone industry’s also-rans are struggling. Motorola lost $797 million during the year ended in September. It was sick before Google bought it, but its purchase carried drawbacks specific to the search giant. Because Google’s main mobile effort is an operating system that other hardware companies use, it didn’t make a lot of sense to compete directly with its customers.

Google does emerge from the wreckage with most of Motorola’s patents and an experimental technology group led by Regina Dugan, who “did a lot of epic shit” for DARPA before joining the company. Both could be helpful down the road, but that’s likely cold comfort at the moment.

So what’s to say that Google’s current buying binge, which includes acquisitions of smart thermometer company Nest and robotic powerhouse Boston Dynamics, will turn out any better than its foray into smartphones?

First, as Page pointed out, Google won’t have to chase a powerful leader if it targets industries that don’t really exist yet. And its new purchases are young, vibrant companies, rather than a slipping business struggling to regain its footing. Google’s own hardware experiments with autonomous vehicles and computerized eyewear are similarly ahead of the times. But Google’s lesson with Android is that the company doesn’t necessarily have to build the stuff itself. Also, it has failed in hardware before, with its myriad television projects and the Nexus Q, an octopus-shaped media player.

Google’s latest moves toward physical goods mark a huge expansion of its ambitions. The hope, it seems, is that the pieces will all begin to snap into place by leveraging the company’s biggest strength: data. While each hardware project seems unrelated, they could connect if they can provide grist for Google’s mills and help it spit out targeted advertising, another strong suit. Still, that doesn’t make the task of transforming into a hardware company any easier. While it’s why Google wants to do this kind of thing, less certain is whether the company can pull it off.

Brustein is a writer for Businessweek.com in New York.

Google Is Selling Motorola Unit For $3 Billion

from huffpost

(Reuters) - Lenovo Group said on Wednesday it agreed to buy Google Inc's Motorola handset division for $2.91 billion, in what is China's largest-ever tech deal as Lenovo buys its way into a heavily competitive U.S. handset market dominated by Apple Inc.

It is Lenovo's second major deal on U.S. soil in a week as the Chinese electronics company angles to get a foothold in major global computing markets. Lenovo last week said it would buy IBM's low-end server business for $2.3 billion.

The deal ends Google's short-lived foray into making consumer mobile devices and marks a pullback from its largest-ever acquisition. Google paid $12.5 billion for Motorola in 2012. Under this deal the search giant will keep the majority of Motorola's mobile patents, considered its prize assets.

Shares of Google climbed 2.6 percent to about $1,136 in after-hours trading. Google Chief Executive Officer Larry Page said that Google would be best served by focusing on smartphone software rather than devices.

Reuters reported the deal earlier on Wednesday, citing sources familiar with the deal.

The purchase will give Lenovo a beach-head to compete against Apple and Samsung Electronics as well as increasingly aggressive Chinese smartphone makers in the highly lucrative U.S. arena.

In 2005, Lenovo muscled its way into what was then the world's largest PC market by buying IBM's personal computer division. It has powered its way up the rankings of the global smartphone industry primarily through sales on its home turf but had considered a U.S. sortie of late.

"Using Motorola, just as Lenovo used the IBM ThinkPad brand, to gain quick credibility and access to desirable markets and build critical mass makes a lot of sense," said Forrester Research analyst Frank Gillett.

"But Motorola has not been shooting the lights out with designs or sales volumes in smartphones. So the value is simply in brand recognition to achieve market recognition faster - and to expand the design and marketing team with talent experienced at U.S. and Western markets."

RISE OF THE CHINESE

The deal is subject to approval by both U.S. and Chinese authorities.

Chinese companies faced the most scrutiny over their U.S. acquisitions in 2012, according to a report issued in December by the Committee on Foreign Investment in the United States. Analysts say political issues could cloud the Motorola sale, especially with Lenovo trying to seal the IBM deal at the same time.

Lenovo will receive over 2,000 "patent assets" as part of the transaction, the companies said, but it remains unknown which will change hands and whether they might be subject to extra scrutiny from regulators.

For Motorola, Lenovo will pay $660 million in cash, $750 million in Lenovo ordinary shares, and another $1.5 billion in the form of a three-year promissory note, Lenovo and Google said in a joint statement.

"The acquisition of such an iconic brand, innovative product portfolio and incredibly talented global team will immediately make Lenovo a strong global competitor in smartphones," Lenovo's chief executive, Yang Yuanqing, said in a statement.

In two years, China's three biggest handset makers - Huawei, ZTE Corp and Lenovo - have vaulted into the top ranks of global smartphone charts, helped in part by their huge domestic market and spurring talk of a new force in the smartphone wars.

Although Huawei and ZTE have made some inroads in the United States, where the Chinese companies continue to grapple with low brand awareness, perceptions of inferior quality and even security concerns. Lenovo has until now stayed out of the U.S. market.

In the third quarter of last year, ZTE and Huawei accounted for 5.7 percent and 3 percent of all phones sold in the United States, respectively, trailing Apple's 36.2 percent and Samsung's 32.5 percent, according to research house IDC.

Huawei declined to comment on the Lenovo deal on Wednesday. ZTE did not immediately offer comment.

Globally, Lenovo ranked fifth in 2013 with a 4.5 percent market share, according to IDC. That's up from 3.3 percent in 2012 and virtually nil a couple years before that.

STEP BACK

For Google, the sale represented a solution to a persistent headache as Motorola's losses widened in recent quarters. It also showed Google is willing to step back from the handset arena and throw its weight behind device makers that propagate its Android software, Kantar analyst Carolina Milanesi said.

"It all points to Google thinking in the short run that they're better off betting on Samsung and keeping them close," Milanesi said. "And of course now they're enabling a second strong runner (Lenovo) in the Android ecosystem."

In 2012, analysts saw Google's Motorola acquisition as primarily a way to secure the company's trove of patents amid the technology sector's increasing legal battles - rather than a bona fide push into the handset business.

Many industry observers were surprised that Google did not immediately sell the hardware division after the deal closed, choosing instead to operate Motorola a separate company.

It did sell Motorola's cable television set-top box business to Arris Group Inc for $2.35 billion at the end of 2012.

In a blog post on Wednesday, Google's Page highlighted the strategic choice in selling the Motorola handset business.

"The smartphone market is super competitive, and to thrive it helps to be all-in when it comes to making mobile devices," Page wrote. "This move will enable Google to devote our energy to driving innovation across the Android ecosystem, for the benefit of smartphone users everywhere."

Lenovo is being advised by Credit Suisse Group while Lazard Ltd advised Google on the transaction.

(Writing by Edwin Chan; Editing by Soyoung Kim, Chizu Nomiyama and Leslie Adler)

After Big Bet, Google Is to Sell Motorola Unit

from nytimes

By CLAIRE CAIN MILLER and DAVID GELLES

Nelson Almeida/Agence France-Presse — Getty ImagesDennis Woodside, chief executive of Motorola Mobility, introducing a smartphone aimed at emerging markets in November.

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Larry Page, Google’s co-founder and chief executive, likes to talk about “big bets” and “moonshots.” But the thing about moonshots is that they can crash into earth.

That appears to be what happened to Motorola Mobility, the cellphone maker owned by Google. The Internet giant announced Wednesday that it would sell Motorola to Lenovo for $2.91 billion, less than two years after paying $12.5 billion to acquire it.

Motorola was Google’s biggest acquisition by far and was hailed by the company as an example of the big bets Mr. Page was unafraid to make. Yet Motorola has continued to bleed money, aggravating shareholders and stock analysts, and its new flagship phone, the Moto X, did not sell as well as expected.

The deal is not a total financial loss for the extremely wealthy Google. In addition to keeping billions of dollars’ worth of patents, it essentially turned Lenovo into a factory for its Android operating system, and also picked up some cash. Still, it is a sign of the fits and starts the company is experiencing as it navigates business in the mobile age, which has upended technology companies of all types.

Related Links

• Did Google Really Lose on Its Original Motorola Deal?

In addition to using Motorola’s patents to defend itself in the mobile patent wars, Google pledged to reinvent mobile hardware with Motorola’s new phones, and directly compete with Apple by owning both mobile hardware and software.

Yet while Google’s business depends on phones getting into the hands of more people around the world, it benefits from selling the ads on those phones, not the phones themselves. Selling Motorola is an acknowledgment that Google is better off focusing on its core competencies — making software and selling ads — particularly as the profit margins for phones are shrinking over all.

“They make their money from people watching YouTube ads and doing searches,” said Colin Gillis, an analyst at BGC Partners. “They don’t necessarily need to be the hardware maker.”

Still, Google will retain about 15,000 of the 17,000 patents it acquired as part of its original deal for Motorola, and will grant Lenovo a license to use certain ones. Analysts have described the patents as the most valuable part of the acquisition, worth several billion dollars alone because they are firepower for Google to defend its Android mobile operating system.

Though the patents have not proved to be very helpful to Google in patent litigation, they have helped in cross-licensing agreements with other companies, including one Google and Samsung announced on Monday.

Google’s share price climbed 2 percent in after-hours trading after the announcement, a day before the company was set to announce its fourth-quarter earnings. “Motorola’s been a millstone and a drag on results,” Mr. Gillis said. “You’re slipping the millstone off your neck.”

Lenovo, already the world’s biggest PC company, is buying itself a toehold in the fast-growing smartphone business during a worldwide slowdown in PC sales, and overnight brand recognition in the West. In an interview, Wai Ming Wong, Lenovo’s chief financial officer, said the deal would feed the company’s “PC-plus” strategy.

“The Motorola handset business comes in very nicely to expand our business further,” Mr. Wong said.

Motorola, which has a storied history as the maker of the first commercial cellphone, more recently fell behind rivals like Apple and Samsung. Mr. Page announced the deal to acquire Motorola just months after he reclaimed his position as chief executive of Google, and appointed Dennis Woodside, who previously ran Google’s sales and operations, as chief executive of Motorola Mobility.

Mr. Woodside said he would focus on just a few new phones instead of the old lineup of dozens. Yet the phones did not sell as well as expected, and Motorola continued to lose money despite drastic cost-cutting.

The decision to buy Motorola was “the extravagance of being a company with over $350 billion in market cap,” said Jordan Rohan, an analyst at Stifel Nicolaus. “I’m not sure Motorola was fixable, and growth is much easier to come by on a company that’s not a fixer-upper.”

Still, Mr. Page said Google remained committed to hardware, a business that it has been entering over the last couple years, most notably with Motorola but also with products like Google Glass and companies like Nest Labs, the maker of smart thermostats and smoke alarms that Google acquired this month for $3.2 billion.

“This does not signal a larger shift for our other hardware efforts,” Mr. Page wrote in a blog post. “The dynamics and maturity of the wearable and home markets, for example, are very different from that of the mobile industry.”

He also played up the benefits of the sale for Google’s Android system, saying that getting rid of Motorola would enable it to focus more on Android and that Lenovo would use Motorola to expand Android globally.

“Lenovo has the expertise and track record to scale Motorola into a major player within the Android ecosystem,” Mr. Page said.

It is unclear exactly how much money Google lost on the Motorola deal over all. In addition to the patents Google is keeping, Google sold Motorola Home, the portion of the business that made set-top boxes, to Arris in 2012 for $2.35 billion. Motorola also had $2.9 billion cash on hand when Google bought it.

Google is also retaining a small division working on cutting-edge technologies, led by Regina Dugan, who was hired from the government’s Defense Advanced Research Projects Agency.

“On the heels of buying Nest and buying all these robotics companies, it makes you worry that they’re destroying capital,” Mr. Gillis said. “But that’s what big bets are — some things you lose and this is a losing bet.”

Lenovo appears to be building a comprehensive business in computers. Once known primarily as a maker of personal computers, last week Lenovo paid $2.3 billion for a big part of the computer server business of IBM.

Lenovo’s shopping spree may be driven by the necessity of moving into other markets. Last year, the world PC market contracted by 10 percent, to 314.5 million units, according to the International Data Corporation.

In the smartphone market, Apple and Samsung have taken share from almost all other suppliers. In its home country of China, Lenovo may be concerned about the rise of local smartphone manufacturers.

“It makes strategic sense for both Google and Lenovo,” said Andrew Costello, a principal at IBB Consulting. “It will give Lenovo a strong brand in the mobile space outside of China that they don’t have today, and it gives them deep operator relationships with AT&T and Verizon. And for Google, they’re able to focus on the services side, which is what they’re best at, and retain the patent holdings.”

Quentin Hardy contributed reporting from San Francisco, Michael J. de la Merced from New York and Eric Pfanner from Tokyo.

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This post has been revised to reflect the following correction:

Correction: January 29, 2014

An earlier version of this article misspelled the name of a market research firm. It is NPD Group, not NDP Group.

Samsung, Google Cross-License Patent Portfolios

from pcmag

• By David Murphy
• January 26, 2014 09:37

The noise you just heard was the sound of a group of Apple executives – and the lawyers they've hired – hitting their heads into a desk. To phrase it another way, the enemy of my not-really-enemy-but-it-can-be-tense-sometimes friend is also my… enemy?

However you want to slice it, Google and Samsung announced today that they have signed off on a cross-licensing deal that should cover the companies' existing patents as well as patents produced by either across the next decade.

As for what, specifically, that entails — surely a few categories are off-limits, right? — we don't quite know, for neither company has been keen to address any details beyond that simple announcement. That includes whatever price tags are attached to the arrangement as well.

According to a Samsung press release, the move will allow both companies to tap into "each other's industry-leading patent portfolios" for future research and development of both hardware and the technologies that go into them.

"We're pleased to enter into a cross-license with our partner Samsung," said Allen Lo, deputy general counsel for patents at Google, in a statement "By working together on agreements like this, companies can reduce the potential for litigation and focus instead on innovation."

The move is expected to give both companies a bit more legal ammunition in the unsightly world of patent lawsuits. For Samsung, that mainly concerns the company's current sparring with Apple in a variety of courts across a variety of countries — including a second round of litigation in the United States District Court for the Northern District of California scheduled to start March 31 of this year.

While it's unclear just how, if at all, Samsung might benefit from the new licensing, the move comes in advance of both companies' CEOs anticipated mid-February mediation meeting. It's hoped (though quite unlikely) that both parties will find a way to settle their differences in advance of the scheduled courtroom visit the following month.

If all this patent nonsense sounds a bit like two warring sides bolstering their armies, you'd be correct. Samsung currently enjoys similar licensing deals with Microsoft and Nokia, and it's likely that Google will go after similar licensing arrangements with other Android handset manufacturers. Apple, on the other hand, has worked out a licensing arrangement with HTC and Microsoft as well, in addition to a licensing arrangement earlier this year that allows the company to tap into older Palm patents.

"This agreement with Google is highly significant for the technology industry," said Dr. Seungho Ahn, of Samsung's Intellectual Property Center, in a statement. "Samsung and Google are showing the rest of the industry that there is more to gain from cooperating than engaging in unnecessary patent disputes."

Patent disputes that, in California at least, Samsung seems to be losing.

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Apple has the Mac to thank for its next generation of devices

from cnet.com

by Ross Rubin

Thirty years later, the Mac's journey is far from over. It's had an even greater influence on the company's touch devices than the Apple II did on the Mac.

When Apple introduced the Mac 30 years ago, it was already a successful computer company with the Apple II, a product that would continue to be successful for years after the launch of Apple's new darling. If it had taken the approach Microsoft had with Windows 1.0, and laterWindows 8 and Surface, it would have grafted a graphical interface onto the Apple II -- something that actually eventually happened toward the line's decline with the Apple IIGS -- and perhaps provided a more limited number of expansion slots.

Instead, the Mac was almost a complete break from Apple's first hit. It had an integrated monitor, eschewed color, said farewell to its ProDOS interface, and seemed to offer a keyboard only reluctantly, omitting cursor keys to push people toward the mouse.

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As the company has pointed out at its product introductions over the years, its stubborn commitment to match tailored user interface experiences to devices has been shown in theiPod's click-wheel and the iPhone's multitouch display. Indeed, unlike Microsoft, which is pushing hard to conflate laptops and tablets, Apple sees its user interfaces as a defining difference between them.

The Mac's journey is far from over. When the company introduced its Mavericks operating system, it noted that it wanted a naming scheme that could serve for the next 10 years of OS X. That said, when Apple began the tablet explosion with the iPad, and even at iOS' debut in the iPhone, we saw more of the Mac in Apple's touch devices than we did of the Apple II in the Mac. These characteristics include:

Icons and the dock Unlike the Mac, which departed completely from the Apple II's user interface, the iPad has some strong similarities to the Mac. While there's no desktop, windows, or menus, the iPad features icons and a dock. Apple has even brought the iPad's Launchpad interface and full-screen apps to the Mac, though veteran users mostly ignore at least the former.

A closed box Like the first Mac, the iPad was designed to be minimalist and unobtrusive. One of the great debates in Mac history was about how open the Mac should be toward expansion. Jean Louis Gassée, former head of Macintosh development, argued that the Mac should be open to expansion and advocated for the powerful Macintosh II line of PCs. (His license plate read OPENMAC.) With Steve Jobs' return, though, the Mac again reverted to a closed box limited to external expansion, a journey that has culminated in the now small, but mighty, Mac Pro. Similarly, the iPad has minimal expansion and, unlike other tablets, lacks onboard support for USB, HDMI, and microSD cards. And Apple still has a proclivity for its own connectors -- Apple Desktop Bus on early Macs and Lightning on the iPad.

Single-tasking With the arrival of iOS 7, Apple added full multitasking to the iPad and iPhone. But the first iPad, like the first Mac, had limited multitasking. Curiously, one of the reasons for justifying such a limitation in iOS' early days -- power consumption -- had little relevance for Apple's famous beige box.

Over the next few years, tablets are likely to displace clamshells further as the go-to device for many casual computing tasks, particularly those that Jobs emphasized at the iPad's introduction -- e-mail, Web, video, and books. Samsung even recently introduced a 12-inchGalaxy Tab Pro, and rumors are that Apple may break the 10-inch barrier as well. This will enable tablets to further encroach on the turf of the Mac and traditional PCs. But regardless of the Mac's trajectory, its tradition of breaking with convention and focusing on new user experiences -- even if it means giving up competitive features -- has carried through to Apple's next generation of devices. Deep within, the iPad has the soul of an old machine.

Refrigerator Hack: 750, 000 Spam Emails Sent by Smart Gadgets

from hngn.com

By Julie S | Jan 18, 2014 08:21 AM EST

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A security firm revealed that even "smart" appliances are vulnerable to hack attacks. A group of cybercriminals have used a "smart" refrigerator to send 750,000 spam emails. (Photo : Reuters)

A security firm revealed that even "smart" appliances are vulnerable to hack attacks. A group of cybercriminals have used a "smart" refrigerator to send 750,000 spam emails.

Smart appliances are household devices that are able to connect to the Internet including computers, home Internet routers, media PCs and smart TVs. These devices can communicate to the smartphone, tablet or laptop through Wi-Fi. One example is a "smart" refrigerator which can tell the owner when it's time to change the filter. This new technology was designed to simplify tasks at home and save energy costs. However, since these appliances are able to connect to the Internet, it makes sense that cybercriminals were able to find a way to exploit them.

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A report from U.S security firm Proofpoint Inc. revealed that cybercriminals have hacked over 100,000 smart appliances and used them to send out more than 750,000 spam emails across the globe. Just imagine your refrigerator sending an email to your smartphone, laptop, or tablet.

David Knight, general manager of Proofpoint's Information Security division, said in a press release, "Botnets are already a major security concern and the emergence of thingbots may make the situation much worse."

 "Many of these devices are poorly protected at best and consumers have virtually no way to detect or fix infections when they do occur. Enterprises may find distributed attacks increasing as more and more of these devices come on-line and attackers find additional ways to exploit them," he added.

The hack attack allegedly happened between December 23, 2013 and January 6, 2014, three times a day. Proofpoint reported 25 percent of the spam emails sent to both personal and business email addresses were from smart appliances.

The security firm also noted that the hacker behind this attack is difficult to trace location-wise because several IPs were used.