Understanding Google's Strategy With Motorola

The tech company version of the Art of War

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Google's acquisition of Motorola Mobility surprised everyone (everyone except this blogger who predicted it would happen two weeks ago). Both companies as well as their lawyers somehow managed to keep a tight lid on the $12.5 billion acquisition--Google's biggest ever--in a move that rivals even Steve Jobs's super surprise product releases. But according to some tech and media bloggers, Google's keeping mum was about neither whetting consumers' appetites for shiny new things to buy nor hasty planning. (Motorola's SEC filings show that planning may have begun as early as March.) Rather, the search giant took an Art of War approach to the acquisition, steering competitors and the media in one direction while secretly building a tactical advantage that would catch everyone by surprise. In hindsight, it seems like Google founder and CEO Larry Page just scored a hat-trick of deception.

"Pretend inferiority and encourage his arrogance."

Like many, tech columnist Dan Lyons links Google's Motorola purchase to the recently furious battle for software patents in Silicon Valley. In July, a consortium of companies beat Google in an auction for Nortel's portfolio. What idiots! says Lions:

Google just sandbagged its rivals. The whole thing was a rope-a-dope maneuver. Google never cared about the Nortel patents. It just wanted to drive up the price so that AppleSoft (those happy new bedmates) would overpay. Today, with the Motorola deal, Google picks up nearly three times as many patents as AppleSoft got from Novell and Nortel. More important, Google just raised the stakes in a huge way for anyone who wants to stay in the smartphone market.

By the numbers, Google got a much better deal than the AppleSoft consortium. Whereas AppleSoft paid $4.5 billion for about 6,000 patents, Google picked up four times the patents (24,000) for the less than three times the price. (Update: MG Siegler from TechCrunch has posted a worthwhile debunker of Lyons's claims on his personal blog.)

"All warfare is based on deception."

Since that bidding war, Google has won the media's favor by framing themselves as victims of shady patent practices in the tech industry. Given their relatively late arrival to the Silicon Valley scene, Google didn't have the time to acquire the kinds of software patents that other companies used both as ammunition to beat back competition and as a shield when sued for infringement. The company's chief legal officer embarked on what seemed to be a stunningly aggressive PR campaign attacking the AppleSoft group's Nortel purchase for "escalating the cost of patents way beyond what they’re really worth" and blamed the consortium for stifling innovation. AppleSoft responded with a resounding defense of their patent hoarding, a position that actually amplified Google's claims about our broken patent system. Despite some bloggers scolding Google for being hypocritical in first participating in the auction and then crying foul when they lost, others commended the search giant for starting the debate.

"Strategy without tactics is the slowest route to victory. Tactics without strategy is the noise before defeat."

Google also hoodwinked the business world, but it's unclear how this will pan out. Felix Salmon at Reuters meditated on how Google's surprise announcement undermines the old method of bankers leaking this kind of news to business reporters:

Virtually everybody wins when this happens. The leak always takes place when markets are closed, so there’s no risk of insider trading on the news. The banker leaking the news gets to control the story, since the journalist isn’t going to call around before publishing it. And the journalist gets a big scoop.

In the age of the internet, Salmon explains, it's much harder to control the story. When non-journalist Larry Page broke the story in a 4:35 a.m. blog post, everyone in the firestorm of responses had to start from scratch, and the catalog of recent reporting on Google all pointed to the insane blogfight from weeks previous. In Salmon's scenario, the bankers and the journalists win, but depending on the spin, the companies involved in the acquisition deal can get caught in the middle. Tech stocks roared out of the gates after the announcement, with gossip that other phone manufacturers could be acquisition targets. Google's stock however dipped, amidst harried speculation that the deal could be a disaster.

Inevitably, speculation about the deal abounds. Some wonder if the massive purchase will increase scrutiny from regulators over allegations of anti-trust practices. Others point out that the still pending deal will cost Google $2.5 million if it falls through. And of course, as vigorously as everyone is painting the purchase as Google's ultimate patent power play, the company does look pretty hypocritical in spending the equivalent of a small nation's GDP for the biggest patent portfolio in the business. Nevertheless, Google looks like the more tactful warriors in the patent battle. Like Sun Tzu writes in the Art of War, "To know your Enemy, you must become your Enemy."

This article is from the archive of our partner The Wire.