How will Apple respond to Google's in-your-face?

Faith Merino · August 15, 2011 · Short URL:

Google goes on the offensive and buys Motorola, but how will Apple and Microsoft fight back?

In its early morning conference call, Google didn’t deny that its newly announced acquisition of Motorola is an “in your face!” to competitors who have been buying up patents with which to threaten the Android platform.  But Jefferies analyst Peter Misek doesn’t believe that the deal is a purely defensive move.  Rather, Google may have just gone on the offensive in the patent war with competitors like Microsoft, Apple, and Oracle.  What are the competitors to do?  Clearly, they’re going to have to make some major acquisitions of their own.

Misek revealed in a company note that Jefferies has identified 500 essential 3G and 4G patents in Motorola’s portfolio of 17,000 approved patents and 7,000 pending patents, which would suggest that Google shelled out no less than $20 million for each one.  The patents obviously give Google quite a bit of leverage over its competitors, who recently banded together to buy Novell’s and Nortel’s patent portfolios. 

While the Department of Justice intervened on the companies’ purchase of the Novell patents on suspicion of anti-competitiveness, the same has not been true of the Nortel patent portfolio, which contains 6,000 patents—some 60 of which are said to be critical.  Microsoft and Apple recently teamed up to buy the patents, along with RIM, Sony, Ericsson, and EMC, which Google publicly castigated, accusing the companies—specifically Microsoft and Apple—of trying to get ahead in the wireless market by making Android more expensive.

But it sounds like Google has played the trump card.  Not only is Motorola’s patent portfolio bigger, but as Misek pointed out to me, it’s solely owned by Google, whereas the Nortel patent portfolio is owned by a consortium of companies.  In other words, Google doesn’t have to share the way Apple and Microsoft do.

Because of its newfound advantage, analyst Doug Anmuth of J.P. Morgan believes that Google will get a lot more attention from U.S. and European regulators.

But, of course, Apple isn’t helpless.  It has a great big arsenal of cash at its disposal (if you’ve been reading the headlines these days, you would know that Apple has more cash on hand than the U.S. government).  So Misek believes that Apple will counter Google’s move by making a large, strategic acquisition of its own.

Who are the potential targets?  RIM, Nokia, and InterDigital (although InterDigital has taken a bit of a nosedive in the stock market, dropping 14% Monday morning).  And so, let the games begin!


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