It’s of course possible that the speculation is mistaken, but I think it’s incredibly telling that most of the early business reporting about Google’s purchase of Motorola’s mobile phone business maintains that it’s all about the patents. In other words, Google bought a leading handset maker not because it wants to form a vertically integrated smartphone software/hardware maker but because “the world’s biggest internet company needed some solid legal defense.”
Google’s whole problem here is that they were a relatively late entrant into the smartphone game. All the older players had arsenals of patents that they could use to sue each other and end up settling at little net price. But Google didn’t have an arsenal, so it went out and bought one. For billions of dollars. Luckily for Google, in addition to its Android software, the company also happens to have a hugely profitable web search business that generates the billions of dollars in profits necessary to assemble a patent arsenal. But the signal here to other would-be entrants is clear. No matter how good your product, there’s no sense getting in this game unless a separate business gives you billions of dollars to spend on patents.