Google and Motorola: A Match Made in…

When Google purchased Motorola in 2011 it was widely perceived as a defensive maneuver to stock up on the company’s intellectual property in the face of Apple’s thermo-nuclear patent war against Google’s Android operating system.

Google may not have appreciated it at the time, but rather than suiting up with Motorola’s IP armor, they appear increasingly weighted down by Motorola’s loss-making baggage.

In a financial report that broke earlier than Google had planned, it was revealed that losses from Motorola’s mobile division totaled a staggering $505 million for the quarter. Motorola’s home division losses were a not-as-horrific $22 million. In short, Motorola is fast turning into a major liability for Google’s bottom line.

This has, not surprisingly, led to calls for Google to off-load the struggling company, something Google is reportedly exploring. Google has, to date, maintained an arms-length relationship with Motorola lest they offend their other hardware partners selling Android smartphones, tablets and set-top boxes. Yet there is another avenue open to Google which may promise to right the ship.

In short, they could pull a Microsoft and copy Apple.

Microsoft, like Google, built its empire on software, letting other manufacturers tackle the hardware (the Xbox being a notable, successful, exception). Yet earlier this year, Microsoft broke from this tradition with the introduction of the Surface tablet. Timed with the release of the new Windows 8 operating system, the Surface is a tacit acknowledgement that Apple’s approach to hardware and software integration delivered genuine value to consumers. Throw Amazon’s Kindle Fire tablet into the mix and it’s clear that the new battleground in tech is between software ecosystems (including operating systems, app stores and digital content libraries) that are closely fused with hardware.

Other manufacturers will offer Windows 8 hardware, of course, but Microsoft has realized that to play in this new arena, they needed to stake their own hardware mark. No surprise that there are now persistent rumors that Microsoft will build its own smartphone next.

Indeed, Google has already stepped down this road: they have partnered closely with several manufacturers (Samsung, Asus and now LG) to produce Nexus-branded gear to show off the latest iterations of Android. But Google could do more. They could, in theory, harness Motorola to the same end. Motorola makes all the products necessary to compete in the platform war including set-top boxes, smartphones and tablets. A closer fusion of the two may alienate Google’s hardware partners, like Samsung, but where are they going to go? Android is a vastly more popular mobile platform than Windows and unless Windows 8 is a smash hit, manufacturers will need to offer Android tablets and smartphones to stay in the mobile market.

Moreover, with the introduction of Google Fiber and the company’s continued push into the TV space, leveraging Motorola’s set-top box experience and pay TV provider relationships gives Google a strategic advantage that neither Apple nor Microsoft enjoy.

Will Google do it? Probably not, but in a tech world that is increasing embracing Apple’s model, it’s interesting to note that it’s now Google that’s “thinking different.” And paying a price.