Google Acquires Motorola Mobility - What Now?

Google (GOOG) has recently announced that they will be acquiring Motorola Mobility (MMI) for a whopping $12.5 billion. The deal was under wraps even within Google, as only top management knew about the acquisition up until this week, when Google officially announced their largest acquisition.

The acquisition shakes things up in an already competitive mobile-phone market comprised of giants like Apple, Microsoft, and RIM. What makes this acquisition more interesting is the fact that Google is the developer of the widely popular Android mobile operating system, which already comprises approximately 48% of the market share of worldwide phones operating systems (Canalys, 2011).

The Android operating system is designed by Google and is one

of the most popular operating systems in the mobile phone world.

Image Source: android.com

However, this poses antitrust and regulatory issues for Google in court. Google is optimistic that the acquisition will be given a green light albeit it is possible there will be several conditions set forth by the court. Such conditions include a "chinese wall" between Google's Android division and Google's hardware/manufacturing divisions for handsets to avoid any preference for Motorola products before other manufacturers such as LG, Samsung, and HTC. For example, Google may effectively seize more market share with Motorola if they choose to release new versions of Android onto their Motorola products prior to releasing them for use on other phones. In addition, if the acquisition does go through, Google has agreed to pay $2.5 billion in cash to Motorola Mobility--a sign of the regulatory risks involved with this acquisition.

Google's acquisition of Motorola Mobility may put Google in a stronger position to
compete with the Apple iPhone's huge market share in the mobile phone market.
Image Source: eastersealstech.com

One of the primary benefits of this acquisition is that Google will now have the ability to manufacture and design their own phones with ease, something that rival Apple has had the power of doing for years with their iPhone. Additionally, Google gets an arsenal of patents (17,000 and counting to be exact, with 7,500 pending) to defend their designs with. Recently patents have been an essential part of defending and attacking other companies which attempt to replicate certain design features and software features; for example, Apple recently sued Samsung over their Galaxy Tablet 2, which resembles the Apple iPad 2.

With the ability to manufacture phones on a much larger scale than before, as well as the ability to defend intellectual designs with thousands of patents, Google may be making quite a good decision in acquiring Motorola Mobility. Only time will confirm whether or not it was a good decision in the long run.

Western Digital to Buy Hitachi's Hard Drive Sector

No pun intended on the title (hard drive, bad sectors--bad joke? I know).

Yesterday, Western Digital announced that it would be purchasing Hitachi's hard disk drive (HDD) business for approximately $4.3 billion (in a mixed purchase of both cash and stock). Hitachi would own around 10% of Western Digital's stock after the transaction. This would make Western Digital, already the biggest manufacturer of hard drives in the world--an even bigger hard drive manufacturing giant.

A hard disk drive read/write head and platter.
Source: academic.ru

Currently, Western Digital has a market share of around 31.0%, right above Seagate's market share of 29.7%. After the purchase, Western Digital's market share of the hard drive market will shoot up to a staggering 50% or higher, according to forecasts. However, this brings in the question of whether or not Western Digital will be potentially monopolizing the hard drive industry. Antitrust issues may prevail unless the deal is approved by authorities and not found to damage competition in the market.

However, both Western Digital and Hitachi have stated that they expected the deal to go smoothly and to finish by the third quarter this year. Upon breaking of the news, Western Digital's stock rose by a sharp 16% to $34.68. For a stock that has been down more than 11% for the past year, such a rise is more than welcome by stockholders.

The top 5 main hard disk drive manufacturers, which will be reduced to 4 after the transaction between Western Digital and Hitachi.
Source: IHS iSuppli and The Wall Street Journal

Now that the 5 main competitors (Western Digital, Seagate, Hitachi, Toshiba-Fujitsu, and Samsung) have been reduced to 4, what does this mean for the market as a whole? For one, the competition is probably going to heat up rather than getting reduced. With hard drive prices tumbling over the past decade and the advent of portable tablet computers which rely on static memory (see my SSD drive post), R&D may be the only way to lead a market already saturated with products offering nearly the same performance across the board.

It is clear that with this purchase, the future of hard disk drive costs, performance, and value will be altered significantly. Additionally, with a worldwide cap of neodymium by China (which controls harbors roughly 90% of the world's neodymium--a rare earth magnetic metal which is used in everything from hybrid vehicles to hard drives), new technology will almost become necessary in order to keep prices at bay.

Let's just hope that quality control remains the same across the board with all hard disk manufacturers as demand increases with more tablets, PCs, and laptops being manufactured and shipped around the world.