Why Google wants to buy Motorola Mobility
A manager holds a Motorola's new Droid smartphone sold through Verizon at the Verizon store November 5, 2009 in Orem, Utah.
Kai Ryssdal: It's almost like last week never even happened, isn't it? The markets are up. Consumers are confident. Companies are back in the business of buying each other. And we'll get to all that in due course.
But mostly this week, it's all about what's going on. A thing we're calling The Breakdown: our economy, one step at at time.
Today, where we are in the American economy circa mid-August 2011, and why what we call it actually matters. So driving the day today was a small kick in the pants Google gave Wall Street this morning. The search engine company's going to pay $12.5 billion for phone maker Motorola Mobility. And just because it can, Google is going to pay in cash.
Our technology reporter Steve Henn is here in the studio today. Hey Steve.
Steve Henn: Hey.
Ryssdal: So what is this whole thing about?
Henn: Well, Android has been taking off.
Ryssdal: Android the operating system?
Henn: Android the operating system; Google's operating system. It's exploding -- there are 500,000 new Android phones activated each day. It's overtaken Apple and Blackberry as the most popular kind of smartphone in the world. And one of the reasons it's so popular is it's free to the companies that make the cell phones. So if you're HTC, you don't pay anything for it.
But recently, Apple and also Microsoft have been suing companies that use Android, claiming patent infringement. And in a couple cases, they've forced companies to pay them licensing fees. So this does two things, if you're Apple, right? It brings new money in the door, which Apple obviously needs. And two, it increases the price of the phone that you're competing against.
Ryssdal: Right, that is the Android phones.
Henn: Right, that's the Android phone.
Ryssdal: OK, so how does Google buying Motorola Mobility help?
Henn: Patents. So Motorola Mobility helped invent the smartphone. It has a patent portfolio that's enormous -- something like 17,000 patents. When Apple takes, say HTC, to court, HTC doesn't have a lot of patents, Google didn't have a lot of patents. And they haven't had an easy time defending themselves. So they've basically lost. Now, if this merger goes through, when Google's partners are sued, Google will have their back.
Ryssdal: Help me out here, though: Isn't that the way the marvelous American patent system is supposed to work?
Henn: Sure, that's the purpose of patents: If you steal someone else's idea, you can get taken to court and you're supposed to pay for it. But lots of software developers believe the U.S. patent system -- especially when it comes to software -- is just broken. It's a total mess. There are literally thousands of patents issued for the same ideas. You know, for example, just in the last few years, Amazon was awarded a patent for creating social networks.
Ryssdal: I love that actually.
Henn: Now so that idea's been done, and that kind of thing happens again and again. So Google, Apple, Microsoft have all gone out shopping, buying up thousands and thousands of patents. Most analysts believe it's largely for the purpose of suing each other.
Ryssdal: Very quickly: Is there any hardware aspect to this, controlling means of production and all that stuff on Google's part?
Henn: I think that's the big question that we're going to try to puzzle out for the next week. Google hasn't been interested in hardware; it hasn't wanted to make stuff. What they do with the hardware operation that Motorola has is going to be a big question. But interestingly, a lot of their partners -- people they're now going to be competing against, like Samsung, HTC -- came out and supported this deal. And they've pledged to keep making their Android operating system and making it available for free.
Ryssdal: Marketplace's Steve Henn, our technology guy. Steve, thanks a lot.
Henn: Sure thing.