Google Purchase of Motorola

Google recently purchased Motorola Mobility for about US$12.5 billion (a staggering amount). However, some people are no seeing not only does Google benefit from the thousands of patents (nearly 17,000 as I recall) that Motorola has, but also see significant tax benefits to Google as Motorola continues to report a net operating loss on the income statement. As per a Reauters report:

By agreeing on August 15 to pay $12.5 billion in cash for struggling Motorola Mobility's vast portfolio of 17,000 patents and 7,500 pending patent applications on top of its handset business and television set-top boxes, Google is building a defensive bulwark for its Android phone software, already available on Motorola phones among others.

The acquisition, Google's largest ever, has legal tax and accounting benefits, many associated with the money Motorola Mobility has lost over the years, according to experts who have studied its details.

"The tax benefits of the deal make what was a good deal into a great deal," said Robert Willens, a New York accounting and tax expert. He estimated that through the acquisition, Google can expect to reap $700 million a year in tax deductions from future profits each year through 2019. Google also will be able to immediately reduce its taxes by $1 billion due to Motorola Mobility's U.S. net operating loss, and by a further $700 million due to its foreign operating loss, he said.

However, while some see the patent-purchase as being a good thing, others see the patents as "crap." (See report:

Google says it bought Motorola mainly for its patents. But according to one analyst, those patents are "crap" and won't help Google very much in its patent battles over Android..

The future for smartphones in the US is certainly getting more interesting.

Acer launches mobile phones in Asia

AFP reports Acer has launched their first smat phones into the Asian market. AFP writes:

Taiwan-based computer giant Acer on Wednesday launched a series of advanced mobile phones for the Asia-Pacific region, ramping up its expansion into the wireless communication market.

Company executives said Acer was banking on its experience as a leading computer brand to gain a share of the lucrative market for "smartphones" -- feature-packed devices with multi-media functions including web surfing.

The unveiling of the products here will be followed by similar launches in Southeast Asia, Hong Kong, Taiwan, India, Australia and China, they said.

It came two months after the company announced a move into the mobile phone market in February at an industry event in Barcelona.

Best known for its laptops, Acer said its smartphones come equipped with powerful processing and memory capabilities.

"We are facing a very large opportunity here," said Roger Yuen, Asia Pacific vice president for Acer's smart hand-held device business group.

About 200 million smartphones are sold each year and Acer believes the market should grow at 15 percent annually in the next five years.

"Our ambition is to be among the top five smartphone vendors in the world in the next three years," Yuen said.

Applying the brand to Smart Phones is not such a bad idea but I am not sure if their "experience as a leading computer brand" is applicable to the Smart Phone industry. No doubt Acer have cooked up unique smart phone penetration strategies and maybe they are banking on the brand name to provide them with a good image but overall one would imagine the computer-experience and the smart phone-experience maybe a little different and require different strategies. Anyway, technologies are converging and Acer did need to make this move (it was the next logical step after netbooks).

HTC Continues to Grow

High Tech Computers (HTC), developer of mobile phones and smart phones, is one of Taiwan's amazing companies. If you have been sleeping under a rock, an HTC smart phone is the base for the Google Android smart phone.

The China Economic News (CENS) reported earlier this month HTC is doing incredibly well this year. According to CENS:

The Taiwan-based High Tech Computer Corp. (HTC), a world-caliber supplier of own-brand handsets, forecasts its annual revenue to smoothly hit a historical high of NT$150 billion for 2008, based on a strong revenue growth of over 30% realized in the past eight months of this year, according to Cheng Hui-ming, HTC`s chief financial executive.

Thanks to its hot-selling HTC series smartphones, HTC is expected to post aggregate revenue of NT$105.3 billion for the first three quarters of this year, and score revenue NT$48.8 billion in the fourth quarter, thus achieving annual revenue of about 154 billion for entire the year, sharply up from NT$118.6 billion posted last year.

In the meantime, the Wall Street Journal (WSJ) has an excellent article on the advent of the Smart Phone and the rise of new providers. The WSJ observes:

The U.S. market for smart phones continues to be a tough nut to crack for the established handset makers.

Top-tier players such as Nokia Corp., Motorola Inc. and Samsung Electronics Co. control 80% of the market for cellphones but have struggled in the U.S. to sell smart phones -- phones that allow users to surf the Internet, send email and download music, among other advanced functions.

Often caught up satisfying carrier demands, handset makers have been slow to bring out products in this segment, opening the door for the likes of Research in Motion Ltd. and Apple Inc.

This could prove a crucial error for the traditional players, as they cede the fastest-growing and most profitable slice of the market. "They're really missing out on a critical high-end segment," said Hugues De La Vergne, an analyst at Gartner Inc.

It could be painful for the large handset companies because their strategies are predicated on selling more-expensive high-end phones to complement sales of cheaper mass-market phones, propping up the companies' overall margins. But consumers are turning away from high-end feature phones, which offer one or two special functions, and opting instead for a full-blown smart phone.

Smart phones are where the growth is. More than 35 million smart phones are expected to sell in the U.S. this year, up 77% from a year ago, in a market worth $11.8 billion, according to Gartner. By 2012, the market will be worth $29.2 billion, with nearly 100 million units sold.

Later on, the WSJ comments on HTC saying:

It is no coincidence that Taiwan-based High Tech Computer Corp. has decided to start pushing its HTC name after years of making unbranded phones for the carriers -- its Touch Diamond is among the most highly anticipated devices.

HTC is working with Google Inc. to bring its first Android smart phone out, dubbed Dream.

The newer players can be more nimble and solely focus on the smart-phone market. But the handset makers aren't standing still. Both Motorola and Samsung vow to expand their smart-phone offerings in the second half and next year. "The iPhone has woken the entire industry up in a big way," Mr. Hurd said.

What happened here? It seems the traditional players didn't really keep taps on the market. They never anticipated new entrants (HTC), they never anticipated subsitute products (Smart Phones) and the buyer power was too strong (the carriers). Three of Porter's five forces went against them and they clearly didn't anticipate the impact of the smart phones on their business. There is a lesson here that companies really do need to keep their eye on the ball to see what new products and technologies are becoming available and how those technologies and products will affect their business.

Here in Taiwan HTC is a highly respected company and right now they are going from strength to strength.

CENS: HTC Eyes Record Revenue of NT$150 B. for 2008
WSJ: Smart Phones Challenge Firms