This Monday, the European Commission and the United States Department of Justice gave approval to a proposed acquisition of Motorola Mobile by Google.  A preliminary investigation was launched last August to determine whether the acquisition would substantially lessen competition; however, government officials were unable to find any substantial antitrust concerns.  Both the Commission and the DOJ found that Google’s business plans call for sharing its Android operating system with other hardware manufacturers, and that Google was not likely to use the acquisition as a ploy to cut off other smartphone manufacturers from the market.  By acquiring Motorola Mobile, Google will gain a large patent portfolio that will better help the company to defend itself in lawsuits filed by Apple and Microsoft.

Aside from attaining the patents, there may be another strong reason behind the acquisition.  Currently, the Apple iPhone is the leader in the smartphone market.  By acquiring Motorola Mobile, Google opens itself up to the possibility of developing its own smartphone, positioning itself as a real competitor to Apple.  The dynamics of web searches are changing as more and more people turn to their phones or tablets.  Consequently, web based companies are recognizing a growing chunk of their revenues from mobile advertising. By developing its own smartphone, Google will be better able to promote its Android operating system and more effectively compete with Apple.  It will be interesting to see what Google will be able to come up with, and whether they will ever be able to overtake the behemoth that is the Apple iPhone.  While it may be hard to fathom, the smartphone market is not immune from large shifts in market shares.  After all, Apple had to overthrow RIM (maker of Blackberry) and Palm Inc. (maker of the PalmPilot) to take its position atop the market.

- Stephen Josey

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