Google/Motorola deal opens way for game-changing Microsoft merger with Nokia

August 16, 2011

Say whatever else you like about Google’s $12.5bn acquisition of Motorola Mobile, it’s a landmark deal, defining a new inflection point in the evolution of mobile communications.

How it will do so is another matter. Commentators are widely divided over its ultimate objective or even whether, all things considered, the deal will benefit Google.

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Let’s start with something concrete: the high price. At $40 a share, paid in cash, Google’s offer represented a handsome 63% premium to the smartphone maker’s share price at the end of last week. Even allowing for the currently flustered state of world stock markets, that suggests a measure of desperation on Google’s part to get the deal done.

Why pay so much? Motorola may once have been a great mobile handset brand. But today it commands no more than 2.4% of the market that matters, smartphones – according to analyst Gartner.

Some would suggest that calling Motorola a brand at all is to miss the point. In their eyes, the deal is little more than a defensive gesture, aimed at raiding Motorola’s 17,000 innovation patents. These will bolster the already near-dominant position of the Android operating platform by allowing Google to segue, for the first time, directly into hardware development (tablets in particular). By so doing, Google thinks it will obviate increasingly destructive IP litigation. Mountain View now sees this as the tactic of choice deployed by its principal competitors Apple and Microsoft to slow up Android’s inexorable advance. Like caltrops strewn in the road to block a triumphant cavalry charge.

No less significantly, the Motorola acquisition will enable Google to improve Android user experience. Complete control over a handset manufacturer will mean, in theory at least, fewer glitches (compared with, say, the already intergrated iPhone experience) when it comes to software upgrades. Which in turn means more happy customers and apps developers.

So far, so positive. But, from here on in, the deal looks more risky. Google may not choose to highlight the issue of brand conflict, but Motorola’s competitors most certainly will. And it just so happens that some of these competitors, namely Samsung, HTC, LG and Sony Ericsson, are Android’s most important customers. Without them, their awesome distribution and massive marketing budgets, the “inexorable” advance of Android would be stopped in its tracks. So Google will have to work very hard at convincing them that Motorola will not get first-mover advantage in the event of some major piece of market innovation.

Cynically, Google may well have calculated that Android’s other “carriers” have little choice but to toe the line, there being no visible alternative to its own operating system at this moment.

But that would be to underestimate Microsoft (never a wise thing to do) and what is likely to be the most significant and unforeseen consequence of the Motorola deal. Which is: Microsoft buying Nokia – still the biggest, if no longer the best, mobile phone brand.

That would indeed be an irony. Without the catalyst of the Google/Motorola deal, Microsoft and Nokia might never have been able to convince their shareholders to go the whole hog and commute a peripheral collaboration deal into a fully-fledged merger. With what consequences for Google and Apple we can only guess.

Ex-LG Euro chief Dominic Chambers in hunt for new job

February 3, 2011

Little noticed so far has been the departure of LG’s European marketing director Dominic Chambers, who slipped away without a job to go to at the end of last year.

Why? Well, you could argue that he had done his “revolving door” bit with the Korean electronics and mobile phone handset manufacturer and decided to move on. A tenure of just over two years is consistent with his previous stint as Vodafone’s head of UK marketing: he joined Vodafone in 2005 and left in 2008.

But why the stealth, and why was another job not lined up? The truth, as you will have guessed, is a little more complicated.

Contrary to the suggestion in LG’s brand strapline, Life is not very Good at the moment. The Korean manufacturer has performed dismally in the smartphones arena. Mobile phone hand-sets used to be a third of its turnover; now they have slipped to about a quarter. Last September, a boardroom coup in Seoul ensured the rapid dispatch of Nam Yong, the unfortunate group chief executive responsible for this woeful performance, and his replacement by one of LG’s founders, Koo Bon-joon.

After regime-change comes the purge of the old order. Koo appears to believe that the best solution to LG’s problems is to re-establish central control, partly by ridding the company of its senior non-Korean elements.

Whether Chambers was actually fired, or simply left because he felt increasingly uncomfortable, I do not know. The bottom line is he is looking around. And when he finds his next berth, that may well be good news for BBH, Dare and/or Y&R, who have served him well in the past.

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