Originally Posted by jragosta
That's missing the point. There is value in this deal - and people who jumped into making their comments without understanding everything are starting to look foolish. Do you really think Google plunked down $13 B on a whim?
Yes they did do it on whim. Google was desperate to make some kind of public splash on the patent front to make it look like they were doing something. All their other efforts have failed so far, so they jumped on Moto. Google is a company that acts on a whim so it shouldn't be a shock that this was also done on a whim.
The value falls into 3 areas:
- Tax benefits
- Value of patents and IP
- Value of operating division.
Tax benefits are nice, but they are not a sure thing either. As Google hasn't really talked about them I don't expect them to be worth much.
The value of patents and IP are real, but grossly overstated by Google and the media. The majority of Moto's valuable patents are either already sold, already licensed or are necessary patents that are required to be licensed to others and cannot be used in patent litigation. Its the appearance of patent value that Google is after. In reality though there isn't much there in terms of a bargaining position for Google.
The value of the operating division is negative. Moto is just barely breaking even and is likely to start losing money and burning cash as their sales continue to decline. This means they will actually consume additional Google cash above and beyond the $12.5 billion price. In addition, there are no synergies between Moto and Google so there is no room for them to reduce operating expenses as would normally be done in an acquisition. Inheriting 29,000 Moto employees is going to be a huge drag on Google. Google has a very carefully nurtured culture and acquiring Moto and its very different culture could be like dropping a nuke on Google's culture and way of doing business. It is going to be a huge huge distraction for Google. And the whole "continue to operate as a separate division" does NOT mitigate this.
The reality is that Google has never done a large scale acquisition. They have no institutional knowledge on doing large integrations, running a hardware business or managing such a large workforce. Google made this acquisition in order to make a big show about patents. Its just a bunch of handing waving to get people's attention, but in reality it offers them very little.
This should not be a shock to anyone. The majority of Google's products and new ventures fail. They are used to this and its part of their culture. Now however I believe they have grown arrogant and are convinced that they can't loose, and this time they've gone a lot bigger than they should have. They have demonstrated incredible hubris and chose the Moto acquisition because they didn't want to cooperate with anyone else. They're like a child throwing a temper tantrum.
The final cost of this acquisition is going to be more than $12.5 billion once all the dust settles.