With Motorola sale and Samsung peace, Google finds practical exit to an unconventional (and expensive) deal

9 hours ago Jan. 29, 2014 - 5:13 PM PST

In the nearly ten years Google has been a public company, it has been defined by a curious mixture of ambition, futurism, and unpredictability. This week, Google showed that it also knows when to move on.

The big announcement was Googles decision to offload its Motorola handset business to Lenovo for $2.91 billion. Snap reactions were easy to come by Wednesday afternoon. Those aligned with Google rivals Apple and Microsoft were quick to hoot at the bargain-basement selling price compared to the $12.5 billion Google agreed to pay for Motorola back in 2011. Those more inclined to support Google pointed out that Motorolas patents helped Google defend Android against patent attacks (to some degree) and that Googles intervention likely prevented an iconic mobile phone maker from folding completely.

(L to R): Google CEO Larry Page, Lenovo CEO Yang Yuanqing shake hands on $2.91 billion Motorola deal.

There are some nuggets of truth and gaping holes in each of those arguments. But a fundamental problem created by Googles Motorola acquisition is now solved: Google is no longer an operating system licensor that is also engaged in direct competition with its customers.

Lets look back at the week in full.

On Sunday, Google and Samsung, which was the company arguably most offended by Googles Motorola buy, worked out a global patent licensing deal. Earlier on Wednesday, Re/code reported that the companies had worked out an agreement in which Samsung would dial back its own software ambitions attendees at Samsungs Galaxy S 4 launch last March could have been forgiven for not realizing it was an Android phone and described the deal as a sea change in the relationship between the two companies.

What was the biggest obstacle to the relationship between Google and Samsung? Motorola.

It wasnt so much that Motorolas handsets were competitive: Samsung is dominating the Android handset market and leading the overall market for mobile phones. But the perception that Google intended to be a viable contender in the mobile phone business forced Samsungs mobile group to reconsider its dependency on Google.

Operating system developers who have tried to have it both ways licensing their software for a fee while also making hardware that competes with those customers have not done well. This was one of the (many) factors that sent Apple into a near-fatal tailspin in the 1990s, and forced Palm into a disastrous spin-off of its OS group in the 2000s. Once Microsoft absorbs Nokias handset business, its going to have some tough decisions to make about the future of its Windows Phone licensing model.

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With Motorola sale and Samsung peace, Google finds practical exit to an unconventional (and expensive) deal