Google`s bold bet on Motorola could hit Asian handset makers

Updated: Aug 16, 2011, 09:00 AM IST

Seoul: Asian handset vendors such as HTC and Samsung Electronics could be under pressure after Google Inc swooped in to buy Motorola Mobility Holdings Inc for USD 12.5 billion to help protect its fast-growing Android mobile operating system.

The acquisition of the company will transform the mobile landscape and give Google one of the industry`s largest patent libraries but also pit it against more than 30 other handset companies that now use its Android software.

Wall Street quickly anointed Microsoft a winner in this deal, with Windows potentially benefiting if the acquisition alienates the other phone makers that rely on Android.

"The deal will make most Android players realise how dependent they are on Google and how quickly Google`s plans can change their businesses," said Francisco Jeronimo, an analyst at research firm IDC.

"Samsung, HTC, and Sony Ericsson may now look at other platforms as a way to diversify the risk of being so dependent on one platform."

Google`s Android partners such as Samsung, HTC and LG Electronics officially said they welcomed a deal that will aid their own legal battles, but some analysts questioned the sincerity of those claims, noting that rival companies would now be unlikely to heavily promote Android since it would benefit a direct competitor.

"The danger is that other handset makers feel disenfranchised," said Nomura Securities global technology specialist Richard Windsor. "Motorola is the weaker player. This could actually collapse the entire community."

Android held a 43.4 percent share of the smartphone market at the end of the second quarter, ahead of Nokia`s 22 percent, as per Gartner data. Apple ranked third with 18 percent, the data showed.

"Increasing their Windows Phones portfolio may now be a need in the long term... This acquisition may be the catalyst for companies to reduce their dependence on Google`s platform to face future market challenges," Jeronimo said.

Asian handset manufacturers are increasingly turning to the free Android system, which is popular with operators and consumers in cut-rate markets.

Shares in both Samsung and LG Electronics jumped more than 3 percent, tracking a broader market gain in the post-holiday trade on Tuesday.

"We suspect that Google will now try to provide an umbrella for the Android community that provides IP protection from key rivals such as Apple and Microsoft. This is broadly how Microsoft protects Windows Phone," Nomura said in a note.

"We do not believe that Google will aim to continue to make handsets long term, but will rather look to spin the business out to an Android partner - such as Huawei, LG, ZTE, for example."

The deal stoked immediate speculation that Nokia and Research in Motion -- struggling device makers in a mobile arena dominated by Apple -- would become takeover targets themselves, sending Nokia`s shares up more than 17 percent and RIM`s up more than 9 percent.

Bureau Report

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