Analysts: Google Looks to Novell for Motorola Value

Google's interest in Motorola may really be just for the patents after all.

By Nancy Gohring
Tue, August 16, 2011

IDG News Service — Google's interest in Motorola (MOT) may really be just for the patents after all.

Analysts from Frost & Sullivan noticed that Google's proposed US$12.5 billion acquisition of Motorola amounts to $510,204.08 per Motorola patent and application. Motorola recently said it had 24,500 patent and patent applications.

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That happens to be the exact same amount, to the penny, that the Microsoft (MSFT) consortium paid for Novell (NOVL) patents. Late last year a group of companies led by Microsoft paid $450 million for 882 Novell patents. That works out to $510,204.08 per patent.

This valuation analysis indicates Google isn't particularly interested in the handset business, wrote Frost and Sullivan analyst Craig Cartier, in a commentary about the deal that includes the price comparison to Novell. "The Google-Motorola deal is not about hardware -- it is about patents," he wrote. "In the Motorola acquisition, Google bought a patent portfolio and got a mobile phone business thrown in for free."

It makes sense that Google might look to the Novell sale to help value Motorola, said Jonathan Goldberg, a Deutsche Bank analyst. While there are many factors that go into valuing a deal, "I wouldn't be surprised if they used the Novell deal as a comparison," he said. "If that really is how they valued it, that would add credence to the theory that Google only really cares about the patents, not [Motorola's] other businesses."

When asked if the price of Novell patents determined its offer for Motorola, Google declined to comment, referring instead to its Monday blog post about the acquisition.

Announcing the deal, Google said it would run Motorola as a separate business. It also said the deal would strengthen Google's patent portfolio so that the company could better protect Android from legal threats from Microsoft, Apple (AAPL) and others.

After the deal was announced, experts wondered about how central Motorola's patents were to the deal. Android is under attack on many fronts. Phone makers like HTC, Motorola and Samsung face lawsuits from Apple over their Android devices. Microsoft has convinced HTC and others to license its technology for their Android devices. And Oracle (ORCL) is suing Google charging patent infringement in Android. Acquiring Motorola's large patent portfolio could help Google better defend it and its customers against such legal threats.

Keeping Motorola's handset business could cause trouble for Google too. Other Android users like HTC and Samsung might feel that they are essentially licensing the software from a competitor, with Motorola under Google's roof.

Google could decide to sell the handset operation and just keep the patents and software assets, wrote Caroline Gabriel, an analyst with Rethink Research. "The danger is that Google has paid $12.5bn for a patent position... and gained a company it does not know how to run, and which could damage the very software platform it is seeking to protect."

Nancy Gohring covers mobile phones and cloud computing for The IDG News Service. Follow Nancy on Twitter at @idgnancy. Nancy's e-mail address is Nancy_Gohring@idg.com

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