Not all that long ago, Google bought Motorola for a staggering, $12.5B. This was a surprise move that left the industry somewhat gobsmacked. When asked about the purchase at the time, Tim Cook of Apple simply stated something to the effect, That's an awful lot of money. Apple knows a little about an awful lot of money. They just reported quarterly revenues of over $57B, $13.1B of which was profit. For that record setting feat, their stock tanked. Google just announced that they are about to take a $9.5B bath, and their stock rose by over $12. Despite the stock market's irrational behavior, the Motorola fiasco is a study in three failures.
Motorola's first and biggest mistake was to think they could buy their way out of the paten mess that is Android. As a company, Google's DNA has nothing to do with inventing new things. They have a corporate culture of simply taking what they want. Intellectual property means nothing to them. They were genuinely surprised by Apple's reaction to their wholesale copying. It is understandable that they would want to fight patents with patents.
The problem they faced is that they didn't have any patents. They don't invent things; they steal things. So they did the next best thing. They when out and bought a bunch of patents from a company that has invented things. It is as if they did so based on the rumors of how good the patens were. I can't be certain an attorney even looked the patens over before the purchase. Google just figured that since they bought a pile of patents, they could sue Apple into submission. Fools!
Like Samsung, Google mistook FRAND patents for something that could stand up in court against Apple's proprietary patents. They learned the hard way in loss after loss after loss. After spending $12.5B on patents, they still had nothing they could use against Apple. Other companies have made cross-licensing agreements with Apple because they are companies that have invented things that Apple wants to use. Google is not such a company, and found they could not buy their way into being such a company. Their colossal misjudgment in paten valuation will be studied for years to come.
Made in America
Jingoism is not a business plan. Google saw the opportunity to poke the bear by making hey over the fact that Apple's products were made in China. Google used the Motorola acquisition to wrap themselves in the flag. They wanted to use the Made in America tag to subtly paint Apple as the unpatriotic bad guys who use cheap, Chinese labor to milk ungodly margins for their products.
Unfortunately for Google, they were unable to keep up the fiction that their hardware efforts were making any profit. Their flagship device: the Moto X, just isn't selling very well. I suspect Google is losing money on every one they produce. The price of the handset has been in free fall almost from the first day of availability. Google is learning that bankruptcy is also made in America. Hardware companies have to make a profit on the hardware they produce.
Hardware is a hard business
By all accounts, the Moto X is a nice phone. It failed as a product. Google decided that what they needed was something even cheaper. Enter the Moto G. There is no evidence that this cheaper version of the flagship is doing any better, or even as well. Google, through their Motorola acquisition, wanted to out Apple Apple. They wanted to have a hardware division for their software vision. They wanted a successful vertical. They wanted to take the big stage and introduce the next big thing for which people would be lining up. They bought a fully functioning manufacturere and thought they were halfway there. They weren't even close.
A couple of days ago, I wrote about how Motorola was taking shortcuts with their product. They were offering optional wooden back plates for their flagship phone. The specialty woods they were selling is not what they were delivering. The teak, walnut, and mahogany was a lie. It is just some cheap, nondescript wood painted to look like something more exotic. This shows an utter lack of understanding of the premium market. You cannot claim to be selling crocodile skin wile only schlepping cowhide with a coat of paint. Google does not understand the hardware business, and does not respect customers who pay more for premium products.
$9.5B down the toilet, Google is finally shed of Motorola. Have they learned anything? For a few billion dollars, they just bought Nest: a very cool thermostat company put together by some very smart Apple alumni. It seems they haven't learned anything at all.