23rd August 2011
Most of the time, technology is the driving force in the mobile
phone industry. But at the moment, what seems to be driving the
market is upheavals in the industry itself, resulting in what is
a very turbulent time for businesses and customers alike.
to buy Motorola
purchase of Motorola Mobility for $12.5bn left the
industry in a state of profound shock. Motorola spun
off its mobile phone business in order to see if it
would sink, swim or be taken over by someone else..
so a takeover was not unexpected. But Google? Yes, almost
all Motorola handsets run Android (but not, in fact,
every single one), but as a manufacturer Motorola
Mobility is in a weak financial position.
Perhaps the real reason for the purchase is Motorola's
huge collection of patents - 12,500 of them at last
count with a further 7,500 pending. Increasingly, the
mobile market seems to be about who claims to own what
patents for what technology, and Google actually owns
relatively few of these in this sector.
Although Google's Android partners are nominally
supporting the planned acquisition, it must be crossing
their minds that Motorola may get an unfair advantage.
It could be that Google intends to strip Motorola
of its valuable patents and then sell it on. We wouldn't
fancy the chances of a post-Google Motorola in this case.
And indeed, the whole takeover seems fraught with dangers
for both Google and Motorola.. $12.5bn is an awful lot
of cash, even for a successful business such as Google.
Just days after the Google-Motorola deal was announced,
HP announced the failure
of its webOS platform that it bought along with
Palm and terminated its smartphone and tablet
Sales of webOS devices, especially the TouchPad
have been pretty miserable, despite HP's enormous resources
and a large advertising campaign in the US.
a company the size of HP couldn't turn around Palm and
webOS, then you might assume that it was impossible
to save that platform. But HP has a very poor
record in the mobile handset business - it failed to
transition the iPAQ from a PDA to a smartphone line
- and even more shockingly it looks like it might sell
off its PC manufacturing business, despite being the
Although webOS was a pretty decent OS, it really
didn't add much to a maturing smartphone market. It
might pop up again in embedded systems, but the demise
of this platform is not surprising although still rather
Ironically, HP TouchPads have now sold out since
retailers in the US and UK dumped their stock at as
little as $99 and £89 respectively, and HP are
now dumping stocks of the Pre
3 in Europe as well. So a lot of people will
new experience just how good webOS is.. now that it
Perhaps the main worry is that if a company like
HP couldn't successfully run a business like Palm, can
Google succeed with Motorola?
Apple didn't invent the touchscreen smartphone
or the tablet computer, but its patent lawyers seem
to think differently. Over recent years, Apple has sued
just about every competitor over alleged patent infringements.
Many of these companies have counter-sued Apple for
similar patent infringements, and some (such as Nokia)
have settled complex lawsuits.. for now, that is.
Although patent lawsuits are not new, Apple seems
to have upped the stakes with a determined effort to
drive some of its competitors out of several key markets.
Samsung - one of Apple's biggest competitors
- has come under fire in courts in Germany and the Netherlands
in a move that appears to be an effort to stop
sales of virtually all Samsung smartphones and tablets.
But who supplies Apple with displays and processors
for the iPad? That's right.. Samsung.
Motorola and HTC have also come under
attack from Apple who are targeting Android manufacturers.
In our view, there is something seriously wrong when
a company such as Apple seems to be determined to use
lawsuits over questionable patents to drive competitors
out of the market. It is no surprise then that Google
have moved to strengthen their patent portfolio, and
this endless round of court cases looks to get even
nastier as a result.
You might not have heard of Oracle, a company
that sells no consumer products or devices and that
basically relies on selling database systems to corporate
customers. But Oracle has filed a major lawsuit against
Google over alleged patent violations in their
Oracle are not an innovative company in the traditional
sense, but they are cash rich, and they used some of
that cash to buy Sun Microsystems, a company
that was innovative.. until Oracle bought it.
Now, Oracle seems to be more interested in squeezing
Sun's patent portfolio, and are asking for up to $6bn
dollars from Google.
If Google loses the lawsuit and Oracle get their
way, then Android will either have to be rewritten or
it will no longer be free, damaging the Android platform
in the market. It is likely that Oracle's real aim is
to damage Google by damaging Android, because Oracle
doesn't compete in that market, but Oracle and Google
do compete elsewhere.
Nokia's decision to ditch pretty much everything
with Windows Phone is well known. But there have
been persistent rumours that Microsoft might
buy Nokia outright, which would be a
bold move.. but not an unthinkable one in the light
of the Google-Motorola deal.
Microsoft want to see Windows Phone succeed very
much indeed, and taking control of what is still the
world's largest phone manufacturer may well help it.
But there are several reasons why this might be a bad
move: firstly, Microsoft will keep other partners happy
if it remains neutral (unlike Google with the takeover
of Motorola); secondly, Nokia needs Windows Phone to
succeed to survive, so Nokia are motivated to pull out
all the stops in any case; finally, even Microsoft might
admit that they don't have a great track record with
own-brand mobile devices after the KIN
Indeed, Nokia is so desperate to succeed with their
upcoming Windows device, that the forthcoming MeeGo
N9 isn't even going to be sold in most major markets,
presumably so as not to damage sales.
Still, a takeover is a tantalising possibility for
Nokia stockholders, and one that would have been completely
unthinkable 12 months ago.
Research In Motion, better known as RIM, who
make BlackBerry smartphones are also at a crossroads.
Sales in the US are falling fast in the face of the
iPhone and Android opposition, although in Europe sales
are still looking good.
But at the heart of RIM is a chronic lack of innovation
back several years, and a stubborn fixation with
a platform that is losing appeal for both consumers
and developers. Apart from corporate customers who remain
wedded to this platform, it looks like RIM's star appeal
is fading fast.
RIM have a solution to this - their new BlackBerry
Tablet OS (found on the PlayBook)
looks like a stronger long-term platform, and it is
based on the tried-and-tested QNX OS. But as HP found
out, trying to sell a new operating system into the
existing market is very tough indeed.
If RIM is to have a future at all, then it needs
to avoid the mistakes that Nokia made and it needs to
be more change agile in the future.
LG Electronics is a huge company that
encompasses many business activities, but recently it
has struggled to make a profit while the mobile handset
division has been losing money.
To their credit, LG have pushed hard to innovate
in the mobile phone market with dual-core processors
and advanced display technologies. But they seem to
have a problem with reliability, and sales are well
short of arch-rival Samsung.
LG doesn't need the mobile phone business to survive,
so unless it shapes up soon then there is the possibility
that the parent company may shut it down. Conglomerates
such as Siemens, NEC and Toshiba
are some examples of companies that have quit the mobile
phone industry in the past, so it is certainly not impossible.
After the storm
These are indeed turbulent times for the industry.
There is a good chance that we have only seen the beginning
of industry consolidations and legal battles. The fight
over patents may get much more brutal, more companies
may fail, and in the end it is likely that consumers
will be the ones to suffer.