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After Google acquired Motorola Mobility for $12.5 billion in May 2012, the search giant said that the focus of the deal was patents. Google reassured its Android partners that Motorola wouldn’t get special treatment, and told regulators that it would allow Motorola to operate independently without fear of too much oversight from its corporate overlord. For the most part, Google has made good on that promise.
However, as Motorola’s parent company, Google has a fiduciary responsibility to shareholders to ensure it can prove to them that the deal is going to produce a decent return on this massive capital investment.
In its effort to do just that, Google has been forced to lay off a large chunk of Motorola’s staff and consider selling off at least one division. It turns out that Motorola might have been worth much less than the $12.5 billion Google invested, and the only way for the search giant to get its cash back is to trim the operation and refocus it.
Doing so might be difficult. Motorola is in a bad way. The company generates a comparatively small amount of revenue in the mobile space and its products have yet to even match Samsung’s. There are a number of problems that, if not fixed promptly that could prove that the deal was an expensive mistake that brings down Motorola and harms Google’s profitability and credibility with investors.
Read on to find out more about Motorola’s troubles and what the company should do to address them.
1. Smartphone relevance
Motorola simply isn’t a powerful player in the smartphone market these days. By the end of the first half of 2012, Motorola owned just 11.7 percent of the entire mobile market and wasn’t even able to capture a respectable share in the smartphone market. Google needs to start working on Motorola’s smartphone designs and marketing. Between them, both techniques should address some troubles.
2. Motorola is absent from the tablet market
Motorola was one of the first companies to get into the tablet market with its Xoom slate. However, the company has bowed out of that market after experiencing tough losses. Looking ahead, Google has no choice but to drag Motorola back to the tablet space with products that customers might actually care about. Like it or not, tablets are the future.
3. The set-top box business is a drag
Motorola makes set-top boxes for cable providers. And although it has a sizable share, there isn’t much growth in that market in the coming years. Plus, the financial upside isn’t major. Google is right to want to sell the set-top box operation and get out of that space entirely.
4. Assessing the value of patents
Google offered Motorola a huge premium on its stock price because of its patent portfolio. However, how valuable are the more than 20,000 patents Motorola owns? Granted, the industry is more litigious now than ever and patents are important, but Google might have more luck licensing the intellectual property and getting some of its cash back.
10 Motorola Mobility Headaches Google Must Cure Quickly
5. An issue of quality
Motorola has been hit hard by quality troubles over the years. The company’s products, while nice-looking, lack the appeal of competitors’ models, particularly those from Samsung. Looking ahead, Google should work hard to ensure Motorola’s products offer the best components and the best designs in the space. Value and quality matter.
6. Poor management doesn’t go away so easily
Although Google has replaced Motorola’s former chief executive Sanjay Jha with Dennis Woodside, there are still lingering issues the company’s top management. Motorola executives were used to operating in a certain way and now, there’s a new boss at the home office telling them to do things differently. That causes some growing pains, but they’re necessary for Motorola to grow.
7. Too much Apple focus
Motorola over the years has tried too hard to be Apple. That’s an issue. So far, there hasn’t been a single company that has been able to deliver the combination of design quality and power that Apple has. The chances are Motorola won’t be able to do that. So, the company needs to stop being Apple and start trying to be like Samsung. That company is doing much better, after all.
8. It doesn’t get special treatment
Although Google has reassured its Android partners that Motorola won’t get special treatment, it might not be such a bad idea. Remember: Google has a responsibility to shareholders to make sound decisions that help them. Not helping Motorola achieve more success would be a major mistake.
9. Get back to the ads
When Motorola was successfully offering products to consumers, the company was doing an exceedingly effective job at marketing its devices. Now, though, it’s hard to find a single Motorola ad is effectively grabbing buyers’ attention. Perhaps Google should get back to advertising and find a way to reestablish its brand as something people should care about. Right now, few actually care.
10. No services
The secret to success in the mobile space today is the combination of hardware design and software services. Apple and Samsung both know that and offer extra services, like iTunes and Music Hub, to customers. Google even does so in its Nexus devices. Yet, the company hasn’t invested enough of Motorola’s cash into building worthwhile multimedia services. That’s a mistake that could hurt Motorola in the long run.