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Google's Motorola deal seen as Cold War arms race

Google's acquisition of Motorola Mobility is seen as an attempt to fend off lawsuits from rivals such as Apple.
Google's acquisition of Motorola Mobility is seen as an attempt to fend off lawsuits from rivals such as Apple.
STORY HIGHLIGHTS
  • Google is paying $12.5 billion to acquire Motorola Mobility
  • Experts say the deal is aimed at acquiring patents to protect Google's Android against lawsuits
  • The battle to contol patents has been likened to a Cold War-style arms race
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(CNN) -- Open warfare between technology giants is nothing new, but when Google this week announced it was acquiring Motorola's mobile division, the conflict over mobile phones went nuclear.

Behind the headlines of the $12.5 billion deal, say analysts, is a Cold War-style arms race, with leading firms racing to stockpile the patents that will serve as weapons of mutually-assured destruction.

But as Google squares off against Apple, Microsoft and the creators of BlackBerry, the question is: will anyone benefit from this escalation in potential hostilities or, like the standoff between America and the Soviet Union, will it ultimately prove futile?

Industry observers say Google's latest deal, which saw it pay a 63% premium on shares, is primarily aimed at laying its hands on Motorola's arsenal of patents -- legally protected innovations built up over years at the frontline of cell phone development.

Most of these estimated 24,000 patents have little intrinsic value, says Lee Simpson, a London-based analyst at Jeffries International, but a core 500 or so represent the mother lode, giving Google ownership of key cellular communication technology.

And it is these patents that Google will turn to should it be accused of stealing Apple's own legally-protected iPhone innovations to enhance Google's Android operating system -- a software now used on many popular handsets.

Google's biggest-ever acquisition

Apple upgraded its arsenal last month when it jointly with Microsoft led a $4.5 billion consortium buy up of the bankrupt Nortel Corp. The deal, giving access to 6,000 key communications technology patents, was at the time seen as a blow to Android.

Intellectual property analyst Florian Mueller last month said at least 45 lawsuits currently surround Android and according to Simpson, with Android gaining market dominance, an attack from Apple on an exposed Google was seen as inevitable.

"The reason why Google has gone after this is that Apple is going to become aggressive and until now, Android has had a soft underbelly, with very little patent protection," Simpson said.

According to Simpson, while Apple can lay claim to the touch screen technologies that saw its iPhone revolutionize the market, Android's haul of Motorola patents means it can retaliate by claiming ownership of cellular connectivity technology.

"You've got a standoff here whereby nothing happens. It is the mutual destruction thing that you saw with the Soviets and Americans."

"In the end no one does anything. Stalemate," he said.

Global technology analyst Richard Windsor also sees Google's acquisition as a move to arm itself against an impending attack on the Android's main users -- chiefly Asian-based cell phone manufacturers such as HTC, ZTE and Samsung.

"These guys really need patent protection and what you've seen is the likes of Microsoft and Apple are going after the Android community," he said.

But the question is, will Google's Cold War-style tactics actually benefit the Android community or will such aggressive efforts to defend its market share create casualties along the way.

Benedict Evans, a communications analyst with Enders Research in London, says there is a risk that Google will unintentionally ride roughshod over its new division, with disastrous results.

"There will be a concern that they'll buy it and run it into the ground because they think that they know better than all the Motorola guys, so there is a major execution concern here," Evans says.

"There's going to be a massive culture clash and Google need to be very careful in finding the right balance between innovation and humility."

Says Windsor, another possibility is that, having secured the patents, Google will simply divest itself of Motorola's Mobility's operations manufacturing cell phones and set top boxes (although these could play a key role in Google's TV ambitions).

This would be good news for other manufacturers using the Android platform, he says. For, while bringing hardware and software under the same roof could result in superior technology, it may also freeze out other Android users and cause the community to collapse.

CNN's Alex Mohacs and Richard Quest contributed to this report.

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