Google's Motorola sale is more about Nest than Samsung
Like lots of other people, overnight I pondered Google's surprise sale of Motorola to Lenovo. The timing sure seems odd. Conspiracy theories abound. Among tech bloggers, Samsung ranks as top reason, given the timing, just days after the American and South Korean companies cut a lofty cross-patent deal that also turns way down the extent of Android customization. Certainly the latter agreement is important to Google, for reasons I laid out two years ago in post "Google has lost control of Android".
Some conspiracy theorists contend that Google always planned to sell Motorola and rebuilt the brand only to gain leverage against Samsung, which arguably exercises more direct influence over Android than does Google -- at least from a user experience perspective. But I disagree. The Motorola unloading is a lot more about the search and information giant's acquisition of Nest than anything Samsung does. My reasoning follows.
1. Motorola investment. The Motorola Mobility acquisition was Page's first big one following his return to Google's chief executive chair. Okay, the biggest at $12.5 billion. Google gained an enormous patent portfolio and struggling hardware business, but nevertheless iconic American brand. Motorola invented the cell phone, after all.
Moto is a modern reinvention success story in less than 18 months -- that is from a brand equity perspective. Google's investment was considerable, like setting up the Texas factory, developing touchless and customizable Moto X, and spending wads of cash on marketing. Google rebuilt the brand, gaining lots of goodwill, too. Survey the social web and you will find fiercely fervent fans of Moto X. It's bad business perception to unload such brand equity and customer loyalty.
Page would have to be a real dolt to pour so much into Motorola, and so masterfully, just to use it as a bargaining chip against Samsung.
2. Larry Page. Still, there's a fickleness about Page's leadership, for which two defining characteristics stand out: He constantly cancels Google products or projects and musters a hellbent crusade cross-integrating products or select service features. Consider Motorola as another discard on the heap. The company is no longer strategic to future expansion, all while dragging Google profitability. That alone is reason enough for Page to unload Moto, particularly in context of reasons that follow.
3. Smartphones. Three years ago, Motorola made more sense than today. The smartphone market grew at an amazing pace. But in 2014, sales saturation marks mature markets like Europe and the United States, while the emerging world still offers plenty of growth. From that perspective, the smartphone isn't the future but the past, even with 1 billion units shipped last year, according to IDC.
4. China. The world's most populace country is also the largest smartphone market. Where growth persists, particularly Asia and Africa, Google gains more for Android from Lenovo than Samsung. Lenovo is a Chinese company after all, and one more capable of taking on local white-box Android phone makers than Samsung. Nevertheless, smartphone is but a stepping stone to devices worn or placed all around you.
5. Touchless design. From Google's perspective, as I explain in my book "The Principles of Disruptive Design", touchless interaction is the future of user interfaces -- and the intimacy and availability mesh nicely with the company's core competencies, such as search and information, and profit center (advertising). I would argue that, consistent with Google's longstanding product development strategies, Moto X's touchless design is a beta test for what comes next, with wearable computers front of the line.
6. Advanced Technology and Projects Group. Google won't give up all Motorola, retaining the ATAP division working on super secret future tech, which reportedly includes a modular smartphone. ATAP fits better with future touchless mobile and wearable tech and, finally (I get to it) Nest.
7. Nest. Google's surprise Nest acquisition, about two weeks ago, fits well with the touchless future, where contextual usage matters more than any device. What Google wants is anywhere computing, where ad-supported, contextual information is always available to you.
Five years ago, Craig Mundie, Microsoft chief strategy officer, said that the successor to the PC is a "big room". I scoffed off the prediction at the time. But given Nest's home tech products, and what Google could do with them, maybe Mundie was right after all.
Today TechCrunch claims -- without stating source, mind you, but believable nevertheless -- that Nest will become Google's hardware group. Where Motorola goes out, as hardware subsidiary, Nest comes in -- more intimately aligned. If Motorola is the past, and Nest the future, there's lots of sense to letting Lenovo take over the phone business. ATAP and Nest fit well with touchless computing, whether something you wear or the room where you walk.
I don't discount Samsung as a reason for the Motorola sale, just not the one that matters most.
By the way, when I pitched the story, newsroom chatter about Nest's future under Google followed:
Wayne Williams: Next week my house is being fitted with Nest smoke detectors...
Brian Fagioli: Googol will track when you burn food and report to home insurance companies that you are a risk.
Wayne: I'm hoping they'll send 'food you cannot burn' ads to my Gmail.
Brian: 'Wayne, weve detected you burned a pizza, here are coupons for Ellios'.
Alan Buckingham: Your thermostat has been sending spam....
Wayne: How cool would that be?
Brian: 'Wayne, we've detected flatulence, here are some less gassy food suggestions'.
Wayne: 'That wasn't me -- it's my daughter, Google!'
Brian: 'Wayne, if you denied it you supplied it'.