On Motorola Home’s sale

Google’s announcement that it was selling its set top box unit may appear like a good idea at first but it’s a sign of short term thinking over long term strategy.

In a world where TV is the next frontier, Google had two offerings: Google TV and, after the acquisition of Motorola, one of the largest set top box manufacturers in the world with the Motorola Home business. This meant that the company had deep penetration, through partnerships with cable, phone, and satellite companies, in America’s living rooms and beyond. In choosing Google TV, the company is doubling down on a strategy that has, so far, shown little progress compared to its competitors.

Companies like Apple and Microsoft are trying to get placement in the space that Google is abandoning. Apple is increasingly pushing its AppleTV through a low-cost device strategy, while Microsoft is leveraging its position in the gaming market with the Xbox to become more a full fledged player in digital distribution. Even Amazon has a horse in that race, since it’s added a video out to its popular Kindle Fire HD so it could stream movies and TV shows to a TV set.

The US$2.35 billion sale is a sad end for a unit that was purchased in 2000, at the height of the dotcom boom, for US$17 billion. While it did come with the potential liabilities, as a result of lawsuits brought on by Tivo (and Google has sweetened the deal for the purchaser, by capping how much they’d have to pay if they lost that case), it also presented a unique opportunity for Google to stealthily make its way in the living room.

Google had all the pieces from content hosting (YouTube) to software delivery (Google TV, Android) to penetration in the living room (Motorola Home) but seems to have not been able to assemble the puzzle together into a compelling offering. The company’s sole focus on Motorola’s patent portfolio made it blind to the opportunity it had in assembling and besting its competitors for control of the fourth screen.

Instead, the company will now have to figure out a way to get distribution of its offering on large screens. With Apple rumored to be entering the TV set world soon, the sale of the Motorola Home division may end up looking like a costly mistake next year. While Google does retain a share of equity in Arris Group as a result of this offering, it may come to regret this move.

On the other hand, it could be that the company is seeing past the hardware and looking at software as a long run solution. While Motorola Home was dominant in the US, it has been losing shares against faster, more nimble competitors on a global basis. For example, Huawei has been getting increasingly aggressive in the space, besting Google and Cisco in growing markets like India and China. This, in the end, may be the reason Google is letting go (and could also signal that Cisco will soon sell its own TV set top box unit) as Asian competitors may be turning set top boxes into commodities.

Such changes could complicate the road to next generation televisions for not only Google but also for players like Apple and Microsoft, when they try to go beyond the western world.

About the Author

Tristan Louis

Writing and working on the internet since 1993, I've launched 6 companies, of which 2 (internet.com and Earthweb) went public and two were sold (Net Quotient and MoveableMedia). My latest, Keepskor provides tools allowing anyone to develop mobile and connected TV games without writing a line of code. This is my personal site and all opinions here are mine.