Travelling On The Silicon Road

The cyberspace is abuzz with news about Google acquiring Motorola Mobility for a whopping $12.5 billion. Speculations on Google’s motive behind the deal are mainly skewed towards 2 issues – access to patents and the other whether Google has plans to set up another end-to-end mobile empire akin to Apple. Add to that the buzzing concern of a high potential for conflict - mainly whether there still will be a “level playing field” amongst different Android handset vendors.

My two cents….

1. Access to patents: Motorola deal gives Google access to more than 17000 patents. This helps Google lend a legal hand to the embroiled Android handset vendors like HTC and Samsung as well as prepare itself against potential infringement law suits.

Flip side: If that was the main point, would Google not have been better off with just buying the patents like it did from IBM?

2. Potential conflict of interest – open OS partner or a handset competitor?? Now that can indeed be a worrying factor amongst the Android handset vendors - in spite of the prompt support statements from Samsung, HTC etc. Will these companies who had flocked towards Android to compete against Apple now gravitate towards Microsoft’s Windows Mobile? Google has stated that the handset biz will be kept as a separate independent biz and Android platform as an open one as before but the company will have a tough time treading this slippery slope in order to retain the Android handset vendors’ support.

Having said that, we have seen biz areas where the line between partner and competitor has blurred. Pure play foundries, IP vendors and IDMs is one such example. Market conditions have led to consolidation, fab lite etc. IDMs get the core process wafers done from foundries and keep some special process add-ons in-house to retain their specific niche. IP vendors work along with foundries in spite of foundries touting their own IP portfolio as well as specific design services.
Individually it has got very difficult to compete, with combining resources, there always lurk the spectre of “loss of level playing field”.

3. An Apple like end-to-end empire: Lucrative but an extremely difficult path ahead for the search engine giant in the hardware world… a tough act to follow!

But apart from these, the news throws up another nugget too:

The central point of computing is moving away from the desk towards mobile - and search engines do follow the computing devices. A tight integration between hardware and OS will make it easier to get the desired utilities and apps to the consumer – providing the coveted “unique user experience’.

The deal goes beyond handsets. Motorola Mobility is also into set top boxes – just to name another one. This will bring Google back into the home automation market. Gigaom’s Stacey Higginbotham & Katie Fehrenbacher has written a very good article on this; do read it. Getting your ads, location optimized and perhaps with dynamic relevance does require a tighter integration between the hardware and software.

And it is for this reason alone, my opinion is that it will very much be in Google’s interest to keep Motorola Mobility humming away as a separate unit within Google – especially as far as the level playing field of Android handset entities are concerned and leverage this hardware vendor acquisition to bolster its search ads revenues by making it’s ads more pervasive and relevant.
The patents are the special icing on the cake!!

Spreadtrum Communications, the fabless developer of baseband and RF chips recently announced its acquisition of Telegent Systems, a developer of software and silicon for the reception of live broadcast television signals.

While trolling the net, I saw this article that gives a quirky feeling of déjà vu. The article’s contents basically go on these lines….

In 2007, the US Wi-Fi provider and GPS manufacturer, SiRF bought Centrality, a company with navigation & multimedia experience. Later, SiRF itself got acquired by CSR. In hindsight, industry analysts viewed the Centrality purchase as a bad move.

Now the money/invested parties part …Centrality’s major investors included Walden International and it had a NEA (New Enterprises Association) principle on its BoD. An NEA principle was also on the SiRF’s board. Baseline appeared to be - sell the company to a public company and for enough cash that would return the VC capital and perhaps a large profit at the same time for the investors.

Move on to today…

Spreadtrum buys Telegent. Telegent shot into fame (and profits) with its analog broadcast TV. Since then, it moved to mixed signal and then to digital – a realm with intense price competition and very low margins.

Telegent’s investors include New Enterprise Associates and Walden International. Telegent’s CFO was once SiRF’s CFO. Spreadtrum has an NEA principle on Board….. you get the drift?

Will Spreadtrum do a SiRF???