Google is poised to rock the smartphone universe with its Motorola acquisition. The question analysts are pondering is what that rocking will ultimately look like.
When Google announced its $12.5 billion acquisition bid for Motorola on Monday, CEO Larry Page said the move would supercharge the Android ecosystem. But he didn't offer any specific details as to the fallout of said supercharging.
Could Google make Android exclusive to Moto phones? Will Google subsidize Motorola phones and make them free? There are yet more questions: Is the deal solely about patents? Will the FTC approve the merger? Can Google succeed in blending the two companies?
"This is an ugly merger. It reminds me way too much of the AOL and Time Warner merger in terms of the difference in the companies' age and culture," said Rob Enderle, principal analyst at The Enderle Group. "The odds are fairly strong against this one."
Free Moto Phones for All?
Enderle is not the only analyst who has taken that stance. But Enderle also ponders what Google and Motorola could do if the merger does succeed. In fact, a successful integration would change the smartphone ecosystem dramatically because Google would be vertically integrated. That could mean Google takes Android exclusive to Moto.
"Handset makers are not going to want to compete with a company they are licensing from. It will put them at too big of a disadvantage," Enderle said.
"Many of us think Google is going to start putting out free devices. Other handset makers can't compete with free devices without subsidies and Google doesn't share money. Motorola will get money through Google advertising subsidies, but none of the other companies will."
If that happens, Samsung, LG and others could abandon Android if Google doesn't take it exclusive first. That could open new doors for Windows Phone 7 as handset makers scramble to find new options. Although Nokia and Microsoft are closely aligned, the arrangement is not exclusive.
RIM, HP Implications
"The Motorola acquisition also makes RIM an interesting property and it makes HP's move to buy Palm a lot smarter. Someone may try to acquire RIM so they get a chair before the music stops playing and the Android fallout is complete," Enderle said. "Or Google could buy RIM either for the patents or to keep anyone else from buying it."
Despite the possibilities, Enderle still views the Google-Motorola tie-up as an ugly merger. But, he admitted, if Google gives away free phones it could work.
"With enough money you can pull anything out. The HP-Compaq deal was incredibly ugly but they funded it and it worked out even though it shouldn't have," Enderle said. "If you put enough effort into something, even if it looks like a train wreck it could still roll through the wreck. That could happen here."