Posts Tagged‘acquisition’

Microsoft Rumoured to be Looking to Acquire AMD.

The last decade has not been kind to AMD. It used to be a company that was readily comparable to Intel in almost every way, having much the same infrastructure (including chip fabs) whilst producing products that were readily comparable. Today however they’re really only competitive in the low end space, surviving mostly on revenues from the sales of both of the current generation of games consoles. Now with their market cap hovering at the $1.5 billion mark rumours are beginning to swirl about a potential takeover bid, something numerous companies could do at such a cheap price. The latest rumours point towards Microsoft and, in my humble opinion, an acquisition from them would be a mixed bag for both involved.

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The rumour surfaced from an article on Fudzilla citing “industry sources” on the matter, so there’s potential that this will amount to nothing more than just a rumour. Still talks of an AMD acquisition by another company have been swirling for some time now however so the idea isn’t exactly new. Indeed AMD’s steadily declining stock price, one that has failed to recover ever since its peak shortly after it spun off Global Foundries, has made this a possibility for some time now. A buyer hasn’t been forthcoming however but let’s entertain the idea that Microsoft is interested to see where it leads us.

As Microsoft begins to expand itself further into the devices market there’s some of potential in owning the chip design process. They’re already using an AMD chip for the current generation console and, with total control over the chip design process, there’s every chance that they’d use one for a future device. There’s similar potential for the Surface however AMD has never been the greatest player in the low power space, so there’d likely need to be some innovation on their part to make that happen. Additionally there’s no real solid offering from AMD in the mobile space, ruling out their use in the Lumia line of devices. Based just on chips alone I don’t think Microsoft would go for it, especially with the x86 licensing deal that the previous article I linked to mentions.

Always of interest to any party though will be AMD’s warchest of patents, some 10,000 of them. Whilst the revenue from said patents isn’t substantial (at least I can’t find any solid figures on it, which means it isn’t much) they always have value when the lawsuits start coming down. For a company that has billions sitting in reserve those patents might well be worth AMD’s market cap, even with a hefty premium on top of it. If that’s the only value that an acquisition will offer however I can’t imagine AMD, as a company, sticking around for long afterwards unfortunately.

Of course neither company has commented on the rumour and, as of yet, there isn’t any other sources confirming this rumour. Considering the rather murky value proposition that such an acquisition offers both companies I honestly have trouble believing it myself. Still the idea of AMD getting taken over seems to come up more often than it used to so I wouldn’t put it past them courting offers from anyone and everyone that will hear them. Suffice to say AMD has been in need of a saviour for some time now, it might just not end up being Microsoft at this point.

Razer Buys OUYA, Ditches Hardware Line.

Ah Razer and OUYA, two companies I once liked and respected who have both done something to draw my ire. For Razer it was their shameless price gouging tactics for Australian citizens, something which they continue to this day. OUYA simply smoldered its way through all the goodwill I had towards them, ultimately delivering an unfinished product late that has since lumbered along in a kind of zombie state. There had been rumours that OUYA had been courting Razer for a while now, hoping to find a buyer, but like all acquisition talks both sides were rather mum on the details. Today Razer has announced that they will acquire OUYA and use them to bolster their own efforts in this space.

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The deal has said to be an “all cash” acquisition meaning that Razer has used its own cash reserves to pay off all of OUYA’s investors. This pegs the asking price at somewhere around the $33 million mark which sounds like a lot however Razer was just valued somewhere in the order of $1 billion meaning an acquisition of this size won’t put much of a strain on their purse strings. Still I and many others really didn’t see how OUYA could fit into Razer’s business model which, for the most part, is centered around gaming peripherals more than platforms. As it turns out Razer may be looking to OUYA to fix it’s Forge platform which, funnily enough, is encountering many of the same issues that OUYA struggled with.

As part of the acquisition deal Razer will take on the software branch of OUYA but will drop the hardware business. This makes sense since Razer is, in essence, already selling a competing platform but also because the OUYA in its current state is heavily outdated and unlikely to provide much value as another product line. The OUYA store will be integrated in Razer’s Cortex platform, along with the 200,000 user accounts and all the games currently published on the platform. The OUYA brand name will remain but will transition to focus more on becoming a publisher for the Cortex platform more than anything else. Overall it seems like a great outcome for OUYA but I’m not convinced that it’ll do much for Razer.

The Razer Forge’s launch was, to be blunt, a complete disaster as the console proved to be buggy and largely unusable on launch day. Sure the base functionality seemed to work fine however that’s not something that’s unique to the Razer Forge and indeed other products will provide that at a much more reasonable price. Things get worse when you compare it to, admittedly slightly more expensive options, like the NVIDIA shield which received universal praise for the quality of all aspects of the product. Whilst the OUYA team might be able to help fix these problems I feel like they’re already several steps behind the competition and throwing more bodies at the problem isn’t going to solve it.

It may be my dislike for both these companies speaking through but in all honesty the only people that won out in this deal where the investors who were likely staring down the barrels of a soon to be bankrupt company. The Android micro-console market just doesn’t have the legs that everyone hoped it would and the market is already saturated with dozens of other devices that do a multitude of other things than just play games. I will be very surprised if Razer manages to make their Forge TV anything more than it currently is, even with the supposed expertise of the OUYA team behind them.

What’s the Deal with Facebook Acquiring Oculus VR?

Companies buying other companies is usually nothing to get excited about. Typically it’s a big incumbent player buying up a small company that’s managed to out-innovate them in a particular market segment so instead of losing market share the incumbent chooses to acquire them. Other times it’s done in order to funnel the customer base onto the core product that the incumbent is known for much like Google did with many of its acquisitions like Android. Still every so often a company will seemingly go out of its way to acquire another that honestly doesn’t seem to fit and we’re all left wondering what the hell they’re thinking. Facebook has done this today acquiring the virtual reality pioneer OculusVR.

OculusVR Headset Developer Preview 2Facebook and OculusVR could not be more different, one being  the biggest social network in the world that’s got 1.23 billion active users per month and the other being a small company with only 50 employees focusing on developing virtual reality technology. Whilst the long winded PR speech from Zuckerberg seems to indicate that they’re somehow invested in making the Oculus Rift the new way of experiencing the world it’s clear that Facebook is going to be running it as it’s own little company, much like Instagram and WhatsApp before it. With the recent rumours of Facebook looking to purchase drone manufacturer Titan Aerospace, another company that doesn’t seem like a good fit for the Facebook brand, it begs the question: what’s Facebook’s plan here?

Most of the previous high profile acquisitions aligned directly with Facebook’s weaknesses, namely how badly they were doing in the mobile space. Instagram fit the bill perfectly in this regard as they managed to grow a massive mobile-only social network that rivalled Facebook’s own mobile client for usage. Whilst many questioned whether paying $1 billion for a company that hadn’t generated a single dollar was worth it for them it seems like Facebook got some value out of it as their mobile experience has improved drastically since then. WhatsApp seemed to be in a similar vein although the high cost of acquisition (even though this one had some revenue to back it up) makes it much more questionable than the Instagram purchase. Still for both of them it was filling in a gap that Facebook had, OculusVR doesn’t do that.

From my perspective it seems like Facebook is looking to diversify its portfolio and the only reason I can think of to justify that is their core business, the Facebook social network, is starting to suffer. I can’t really find any hard evidence to justify this but it does seem like the business community feels that Facebook is starting to lose its younger audience (teens specifically) to messenger apps. Acquiring WhatsApp goes some way to alleviate this but acquiring the most popular app every couple years isn’t a sustainable business model. Instead it looks like they might be looking to recreate the early Google environment, one that spawned multiple other lines of business that weren’t directly related to their core business.

This was definitely a successful model for Google however most of the products and acquisitions they made at a similar stage to Facebook were centred around directing people back to their core products (search and advertising). Most of the moonshot ideas, whilst showing great initial results, have yet to become actual lines of business for them with the two most notable ones, Glass and the self-driving car, still in the developmental or early adopter phase. Facebook’s acquisition of OculusVR doesn’t really fit into this paradigm however with OculusVR likely going to be the first to market with a proper virtual reality headset it might just be a large bet that this market segment will take off.

Honestly it’s hard to see what Facebook’s endgame is here, both for OculusVR and themselves as a company. I think Facebook will stay true to their word about keeping OculusVR independent but I have no clue how they’ll draw on the IP and talent their to better themselves. Suffice to say not everyone is of the same opinion and this is something that Facebook and OculusVR are going to have to manage carefully lest the years of goodwill they’ve built up be dashed in a single movement. I won’t go as far to say that I’m excited to see what these too will do together but I’ll definitely be watching with a keen interest.

 

What Is Google Doing With All These Robotics Companies?

Google isn’t a company that’s known for curtailing its ambitions; starting off with its humble beginnings as the best search engine on the web to the massive conglomerate that it is today, encompassing everything from smartphones to robotic cars. In the past many of the ideas were the result of acquisitions where Google made strategic purchases in order to acquire the talent required to dominate the space they were in. More recently however they’ve started developing their own moonshot style ideas through their Project X labs, a research and development section that has many of the hallmarks of previous idea incubators. Their most recent acquisition trend however seems to be a mix of both with Google picking up a lot of talent to fuel a potential project that they’re being incredibly tight lipped about.

Big Dog Concept ArtNow I’ll be honest, I really had no idea that Google was looking to enter in the robotics industry until just recently when it was announced that they had acquired Boston Dynamics. For the uninitiated Boston Dynamics is a robotics company that’s been behind some of the most impressive technology demonstrations in the industry, notably the Big Dog robot which displayed stability which few robots have been able to match. Most recently they started shipping out their Atlas platform to select universities for the DARPA robotics challenge program which hopes to push the envelope of what robots are capable of achieving.

Boston Dynamics is the 8th acquisition that Google has made in the robotics space in the past 6 months, signalling that they’ve got some kind of project on the boil which needs an incredible amount of robotics expertise. The acquisitions seem to line up in a few categories with the primary focus being on humanoid robots. Companies in this area include Japanese firm Schaft, who has created a robot similar to that of Atlas, and several more industrial robotics focused companies like Industrial Perception, Meka, Redwood Robotics. They also snapped up Bot and Dolly, the robotics company behind the incredible Box video, who’s technology provided some of the special effects for the recent movie Gravity. There were also 2 design firms, Autofuss and Holomni, who were also picked up in Google’s most recent spending spree.

At the head of all of this is Andy Rubin who came to Google as the lead of Android. It’s likely that he’s been working on this ever since he left the Android division at Google back in March this year although it was only recently announced that he would be heading up the robotics projects. As to what that is currently Google isn’t saying however they have said that they consider it a moonshot project, right alongside their other ideas like Project Loon, Google Glass and the Self Driving Car. Whilst it seems clear that their intention with all these acquisitions will be to create some kind of humanoid robot what kind of purpose that will serve remains to be seen, but that won’t stop me from speculating.

I think in the beginning they’ll use much of the expertise on these systems to bolster the self driving car initiative as whilst they’ve made an incredible amount of progress of late I’m sure the added expertise in computer vision systems that these companies have will prove to be invaluable. From there the direction they’ll take is less clear as whilst it’d be amazing for them to create the in home robots of the future it’s unlikely we’ll see anything of that project for at least a couple years. Heck just incorporating all these disparate companies into the Google fold is going to take the better part of a couple months and it’s unlikely they’ll produce anything of note for sometime after.

Whatever Google ends up doing with these companies we can be assured it’s going to be something revolutionary, especially now that they’ve added the incredible talent of Boston Dynamics to their pool. Hopefully this will allow them to deliver their self driving car technology sooner and then use that as a basis for delivering more robotics technology to the end users. It will be a while before this starts to pay dividends for Google however the benefits for both them and the world at large has the potential to be quite great and that should make us all incredibly excited.

 

Microsoft Buys Nokia: That’s Great, For One of Them.

If you’re old enough to remember a time when mobile phones weren’t common place you also likely remember the time when Nokia was the brand to have, much like Apple is today. I myself owned quite a few of them with my very first phone ever being the (then) ridiculously small Nokia 8210. I soon gravitated towards other, more shiny devices as my disposable income allowed but I did find myself in possession of an N95 because, at the time, it was probably one of the best handsets around for techno-enthusiasts like myself.  However it’s hard to deny that they’ve struggled to compete in today’s smartphone market and, unfortunately, their previous domination in the feature phone market has also slipped away from them.

NOKIA BRICKSTheir saving grace was meant to come from partnering with Microsoft and indeed I attested to as much at the time. Casting my mind back to when I wrote that post I was actually of the mind that Nokia was going to be the driving force for Microsoft however in retrospect it seems the partnership was done in the hopes that both of their flagging attempts in the smartphone market could be combined into one, potentially viable, product. Whilst I’ve praised the design and quality of Windows Phone based Nokias in the past it’s clear that the amalgamation of 2 small players hasn’t resulted in a viable strategy to accumulate a decent amount of market share.

You can then imagine my surprise when Microsoft up and bought Nokia’s Devices and Services business as it doesn’t appear to be a great move for them.

So Nokia as a company isn’t going anywhere as they still retain control of a couple key businesses (Solutions and Networks, HERE/Navteq and Advanced Technologies which I’ll talk about in a bit) however they’re not going to be making phones anymore as that entire capability has been transferred to Microsoft. That’s got a decent amount of value in itself, mostly in the manufacturing and supply chains, and Microsoft’s numbers will swell by 32,000 when the deal is finished. However whether that’s going to result in any large benefits for Microsoft is debateable as they arguably got most of this in their 2011 strategic partnership just that they can now do all the same without the Nokia branding on the final product.

If this type of deal is sounding familiar then you’re probably remembering the nearly identical acquisition that Google made in Motorola back in 2011. Google’s reasons and subsequent use of the company were quite different however and, strangely enough, they have yet to use them to make one of Nexus phones. Probably the biggest difference, and this is key to why this deal is great for Nokia and terrible for Microsoft, is the fact that Google got all of Motorola’s patents, Microsoft hasn’t got squat.

As part of the merger a new section is being created in Nokia called Advanced Technologies which, as far as I can tell, is going to be the repository for all of Nokia’s technology patents. Microsoft has been granted a 10 year license to all of these, and when that’s expired they’ll get a perpetual one, however Nokia gets to keep ownership of all of them and the license they gave Microsoft is non-exclusive. So since Nokia is really no longer a phone company they’re now free to start litigating against anyone they choose without much fear of counter-suits harming any of their products. Indeed they’ve stated that the patent suits will likely continue post acquisition signalling that Nokia is likely going to look a lot more like a patent troll than a technology company in the near future.

Meanwhile Microsoft has been left with a flagging handset business, one that’s failed to reach the kind of growth that would be required to make it sustainable long term. Now there’s something to be said about Microsoft being able to release Lumia branded handsets (they get the branding in this deal) but honestly their other forays into the consumer electronics space haven’t gone so well so I’m not sure what they’re going to accomplish here. They’ve already got the capability and distribution channels to get products out there (go into any PC store and you’ll find Microsoft branded peripherals there, guaranteed) so whilst it might be nice to get Nokia’s version of that all built and ready I’m sure they could have built one themselves for a similar amount of cash. Of course the Lumia tablet might be able to change consumer’s minds on that one but most of the user complaints around Windows RT weren’t about the hardware (as evidenced in my review).

In all honesty I have no idea why Microsoft would think this would be a good move, let alone a move that would let them do anything more than they’re currently doing. If they had acquired Nokia’s vast portfolio of patents in the process I’d be singing a different tune as Microsoft has shown how good they are in wringing license fees out of people (so much so that the revenue they get from Android licensing exceeds that of their Windows Phone division) . However that hasn’t happened and instead we’ve got Nokia lining up to become a patent troll of epic proportions and Microsoft left $7 billion patent licensing deal that comes with its own failing handset business. I’m not alone in this sentiment either as Microsoft’s shares dropped 5% on this announcement which isn’t great news for this deal.

I really want to know where they’re going with this because I can’t for the life of me figure it out.

 

Disney Acquiring LucasFilm Is A Good Thing, So Stop Your Bitching.

I am, like many of my ilk, a long time fan of Star Wars. I have many fond memories of watching it with my family as a kid, not completely understanding all the themes but just revelling in the story. When I heard that George Lucas was going to be making another three I was incredibly excited as I just couldn’t get enough of the Star Wars universe. It’s at this point that my course deviates somewhat from the norm as whilst I don’t believe the prequels were better than the originals I failed to see them being as bad as everyone made them out to be. There were some pretty glaring flaws to be sure but I never really found myself being bored by them which is my yardstick for differentiating good movies from bad.

However I do share the concerns of many with the fact that George Lucas just can’t seem to leave well enough alone as with every new release of Star Wars he seems to make tweaks to them that change the story fundamentally. I probably don’t have to tell you that Han shot first (and if you’re going to disagree with me than we’ll have some words, harsh words) but that’s only the most well known of Lucas’ transgressions against his most devoted community. A quick Google search will bring you this incredibly detailed breakdown of all the changes in the re-released versions, some small some that change the characters and plot in fundamental ways. Needless to say us long time fans have a love/hate relationship with him and this is probably why recent news has caused such a stir.

Yesterday Disney announced that they have signed an agreement to acquire all of LucasFilm, including the intellectual property rights to the Star Wars franchise, for a cool $4.05 billion. The collective nerd sphere screamed out in panic, fearing that this was just the latest front in a long running assault against their most beloved movie franchise. If anyone has a reputation for plundering something for all its worth (more so than George Lucas) it’s Disney and many of them fear that the Star Wars universe will be turned into another Disney Princess, with movie after movie being churned out in order to maximise their multi-billion dollar investment in the company.

Now whilst I can’t allay all your fears in that department (it’s a real possibility) there’s one thing here that I feel a lot of people are missing. Of all the movies in the franchise the most critically acclaimed are the ones that weren’t directed by George Lucas (Episodes 5 and 6, if you’re wondering). The rest were all directed by the man himself and many put the blame squarely on his direction for the reaction that the prequels received. With the transfer of all the rights to Disney it’s very likely that he won’t be heavily involved in the process of creating Star Wars 7, much less end up the one directing it. Of course there’s no guarantee the director they put in charge of it will be any better but the track record is pretty clear in showing that a non George Lucas directed film usually ends up being more well received.

Disney, for what its worth, can make a pretty darn good movie and have shown they can run a franchise pretty damn well. You might disagree on principle but it’s hard to ignore the fact that they’ve been behind quite a few big name movies of recent times like The Avengers and other long running franchises like Pirates of the Caribbean and Toy Story. “We can’t trust them with the Star Wars franchise though!” I hear you saying but who then, apart from Disney, would fit the bill for you? Because realistically you’d find similar fault with any other company that had the means with which to acquire LucasFilm in its entirety and honestly I think Disney makes a great fit for them. It’s no guarantee that we’ll see a return to the glory days of the original trilogy but you’ve got to admit that the chances are better now than they were before.

Maybe I’m just being optimistic here but as someone who’s managed to enjoy the Star Wars universe in many different ways (seriously, The Old Republic was an amazing game) I can’t help but feel that a new head at the helm might be the kick in the pants required to get it going again. Sure Disney will milk this for all its worth but that’s no different to what has been happening for the past 3 decades anyway. At the very least I’d withhold judgement until we start to see some of the previews of what a Disneyed Star Wars looks like before we start jumping to conclusions, especially ones that fail to take into account the fact that the fans’ biggest complaint may have just been taken care of.

Instagram: The Photos Are Bad and You Should Feel Bad.

I’m a kinda-sorta photography buff, one who’s passion is only restrained by his rigid fiscal sensibility and lack of time to dedicate to taking pictures. Still I find the time to keep up with the technology and I usually find myself getting lost in a sea of lenses, bodies and various lighting rigs at least once a month simply because the tech behind getting good photographs is deeply intriguing. Indeed whenever I see a good photograph on the Internet I’m always fascinated by the process the photographer went through to create it, almost as much as I am when it comes to the tech.

Such a passion is at odds with the recently Facebook acquired app Instagram (or any of those filter picture apps).

To clear the air first yes I have an account on there and yes there are photos on it. To get all meta-hipster on your asses for a second I was totally into Instagram (then known as Burbn) before it was even known as that, back when it was still a potential competitor to my fledgling app. Owing then to my “better get on this bandwagon early” mentality back then I created an account on Instagram and used the service as it was intended: to create faux-artistic photos by taking bad cell phone pictures and then applying a filter to them. My usage of it stopped when I made the switch to Android last year and for a time I was wondering when it would come to my new platform of choice.

It did recently but in that time between then and now I came to realise that there really is nothing in the service that I can identify with. For the vast majority of users it serves as yet another social media platform, one where they can show case their “talent” to a bunch of like minded people (or simply followers from another social media platform following them to the platform du’jour). In reality all that Instagram does is auto-tune bad cell phone pictures, meaning that whilst they might be visually appealing (as auto-tuned songs generally are) they lack any substance thanks to their stock method of creation. The one thing they have going for them is convenience since you always have your phone with you but at the same time that’s why most of the photos on there are of mundane shit that no one really cares about (mine included).

To be fair I guess the issue I have isn’t so much with the Instagram service per say, probably more with the people who use it. When I see things like this guide as to which filter to use (which I’m having a hard time figuring out whether its an elaborate troll or not) I can’t help but feel that the users somehow think that they’ve suddenly become wonderful photographers by virtue of their phone and some filters. Should the prevailing attitude not be the kind of snobbish, hipster-esque douchery that currently rules the Insatgram crowd I might have just ignored the service rather than ranting about it.

From a business point of view the Instagram acquisition by Facebook doesn’t seem to make a whole lot of sense. It’s the epitome of the business style that fuelled the dot com bust back in the early 2000’s: a company with a hell of a lot of social proof but no actual revenue model (apart from getting more investors) gets snapped up by a bigger company looking to either show that it’s still trying to expand (Facebook in this case) or a dying company hoping that it can revive itself through acquisitions. Sure for a potential $100 billion company lavishing 1% of your worth on a hot new startup will seem like peanuts but all they’ve done is buy a cost centre, one that Facebook has said they have no intention of mucking with (good for the users, potentially bad for Facebook’s investors).

Instagram produces nothing of merit and using it does not turn one from a regular person into some kind of artist that can produce things with any merit. Seriously if you want to produce those kinds of pictures and not be a total dick about it go and grab the actual cameras and try to recreate the pictures. If that sounds like too much effort then don’t consider yourself a photographer or an artist, you’re just a kid playing with a photography set and I shall treat the pictures you create as such.

iiNet Buys Internode, Australia’s Broadband Future Looks Brighter.

Ever since I’ve been able to get broadband Internet I’ve only had the one provider: Internode. Initially it was just because my house mate wanted to go with them, but having zero experience in the area I decided to go along with him. I think the choice was partially due to his home town being Adelaide, but Internode also had a reputation for being a great ISP for geeks and gamers like us. Fast forward 6 years and you can still find me on an Internode plan simply because the value add services they provide are simply second to none. Whilst others may be cheaper overall none can hold a candle to all the extra value that Internode provides, which I most heartily indulge in.

In Internode’s long history it’s made a point about being one of the largest privately owned Internet service providers (ISPs) in Australia. This is no small feat as the amount of capital required to become an ISP, even in Australia, is no small feat. Internode’s reputation however afforded it the luxury of many geeks like myself chomping at the bit to get their services in our area, guaranteeing them a decent subscriber base wherever there was even a slight concentration of people passionate about IT and related fields. In all honestly I thought Internode would continue to be privately owned for a long time to come with the only possible change being them becoming publicly traded when they wanted to pursue more aggressive growth strategies.

Today brings news however that they will be bought out by none other than iiNet:

In a conference call this afternoon discussing the $105 million takeover announcement, Hackett said that because of NBN Co’s connectivity virtual circuit charge, and the decision to have 121 points of interconnect (POI) for the network, only an ISP of around 250,000 customers would have the scale to survive in an NBN world. With 260,000 active services, Internode just makes the cut. He said the merger was a matter of survival.

“The size of Internode on its own is right on the bottom edge of what we’ve considered viable to be an NBN player. If you’re smaller than that, the economics don’t stack up. It would be a dangerous thing for us to enter the next era being only just quite big enough,” he said.

Honestly when I first heard the news I had some very mixed feelings about what it would entail. iiNet, whilst being a damn fine provider in their own right, isn’t Internode and their value add services still lag behind those offered by Internode. However if I was unable to get Internode in my chosen area they would be the second ISP that I would consider going for, having numerous friends who have done so. I figured that I’d reserve my judgement until I could do some more research on the issue and as it turns out I, and all of Internode’s customers, really have nothing to worry about.

Internode as it stands right now will continue on as it does but will be wholly owned by iiNet. This means that they can continue to leverage their brand identity (including their slightly premium priced value add business model) whilst gaining the benefit of the large infrastructure that iiNet has to offer. The deal then seems to be quite advantageous for both Internode and iiNet especially with them both looking towards a NBN future.

That leads onto another interesting point that’s come out of this announcement: Internode didn’t believe it couldn’t economically provide NBN services at their current level of scale. That’s a little scary when one of the largest independent ISPs (with about 3% market capture if I’m reading this right) doesn’t believe the NBN is a viable business model for them. Whilst they’ll now be able to provide such services thanks to the larger user base from iiNet it does signal that nearly all smaller ISPs are going to struggle to provide NBN services into the future. I don’t imagine we’ll end up in a price fixing oligopoly but it does seem to signal the beginning of the end for those who can’t provide a NBN connection.

Overall the acquisition looks like a decisive one for iiNet and the future is now looking quite bright for Internode and all its customers. Hopefully this will mean the same or better services delivered at a lower price thanks to iiNet’s economies of scale and will make Internode’s NBN plans look a lot more comepetitive than they currently are. Should iiNet want to make any fundamental changes to Internode they’re going to have to do that softly as there’s legions of keyboard warriors (including myself) that could unleash hell if they felt they’ve been wronged. I doubt it will come to that though but there are definitely going to be a lot of eyes on the new iiNet/Internode from now on.

Google and Motorola: A Decisive Acquisition.

Nothing can create a stir in the technical press more than when one tech giant decides to buy out another one. The last such buy out I can remember is when Microsoft said they were going to buy Skype which spurred a good week of articles from all my usual sources. There was also a whole bunch of people blaming Microsoft for ruining Skype as the service hit some troubles soon after the deal was announced, forgetting that the deal still hadn’t been finalized and Microsoft still had no say in how it was operated. Today’s buyout news has triggered a veritable tsunami of news, blog posts and speculation and this time around it’s not just all fluff.

As it turns out Google is going to be buying Motorola’s wireless division (and what then shall we call them: Googorola, GoogMo or maybe Gotogola?).

The news flooded my feed reader with dozens of articles ranging from simple regurgitated press releases to full blown analysis and speculation of what this will mean for both companies’ futures. I then spent the next hour or so devouring and digesting these articles to see if I could make sense of the massive reaction that this proposed buy out has triggered. From what I can tell it boils down to three key issues: Motorola Mobility’s patent war chest, Google’s desire to be a handset manufacturer and the effect that this is going to have on the Android platform. These are all rather meaty issues and whilst I might not have the cred of the larger blogging institutions I felt like I should throw my hat into the ring anyway.

The issue that everyone seems to mention at least once is Motorola Mobility’s rather impressive collection of patents, with 17,000 granted and 7,500 currently pending. The trove includes such pearlers as the mobile phone itself and patents that already have licenses with some of their biggest rivals (namely Nokia and Apple). On the surface acquiring the vast patent archive of Motorola Mobility seemed to be a reaction to Google losing the recent bidding war for the Nortel patents that were up for sale. Indeed Google did complain rather vocally that the partnership of mega-corps that did get those patents (some direct rivals, some users of Android) were only doing so in order to take down Android. However Google never appeared to be totally serious about acquiring those patents anyway, bidding strange amounts like pi and other mathematical constants. They were also apparently approached by the winning consortium to bid along with them (by Microsoft no less) which they turned down and sparked a rather public flamewar between them.

It then follows that Google, whilst not happy that it could have several companies breathing down its neck, didn’t just up and buy Motorola because of it. In fact it looks like Motorola has been under some pressure to monetize it’s vast patent cache for some time, even courting other big names like Microsoft. In the end they settled on Google as Motorola Mobility will retain some level of autonomy whereas Microsoft, still fresh from minting their deal with Nokia, was really only interested in their patents. Had Motorola gone with Microsoft in that instance it would’ve been a massive blow to the Android platform as a whole, as Motorola commands a respective 29% of that market. Motorola’s patents then are more a defensive barrier than anything else but that’s not the sole reason Google bought Motorola Mobility.

Google’s attempt to revolutionize the handset market, whilst commendable in their own right, has faced some problems when trying to break current industry norms. The Nexus One was meant to be sold unlocked for a mere pittance, as low as $99 outright,  but the carriers would have none of that leaving Google handcuffed and the Nexus One made available at industry level prices. Their follow up phone Nexus S, whilst an impressive handset in its own right, suffered the same fate and it seemed that Google’s hope of changing the mobile game was just pure fantasy.

However with their acquisition of the Motorola Mobility section they now get the ability to manufacturer handsets themselves as well as getting all the carrier relationships which, up until now, they have sorely lacked. This means that Google now has a lot more leverage when it comes to negotiating with carriers and they could possibly use this in order to see their original dream of cheap, unlocked handsets realised. I doubt that we’ll see anything like that for a while to come yet (the deal has to pass a lot of scrutiny before it’s official) but the potential for such a thing to happen is far greater with Motorola under Google’s belt than it was without it. 

The final issue that everyone has picked up on is what this acquisition means for the greater Android platform. Now you’d be forgiven for thinking Motorola isn’t that big of a deal, I certainly haven’t considered any of their phones and that holds true for my social group anecdotally. However they are indeed a powerhouse when it comes to Android, commanding some 29% of the market placing them second only to HTC at 35%. Google’s acquisition of them then means that they now have a direct influence over a sizable chunk of the Android market and this has had some speculating that this would mean trouble for other handset manufacturers.

For the most part though the other Android handset manufacturers have been positive about the acquisition and Google has stated that it wants Motorola to operate mostly independently. This is probably the best idea for Google as Android’s popularity can be easily attributed to those handset manufacturers and upsetting them in favour of Motorola would do far more harm than good. Many analysts have also speculated that the Googorola partnership will mean that Motorola will get preferential treatment over other manufacturers but I can’t see Google being that short sighted. The Motorola acquisition seems to be more of a defensive move to save the wider Android platform, not Google’s first steps into dominating the platform that others have helped make popular.

The Motorola Mobility acquisition looks like a positive move for Google, Motorola and the Android platform. With Motorola’s extensive patent chest Google will be able to defend the Android platform against any other mobile player that would seek to dethrone it. They also now have enough power to be able to realise their dream of cheap, unlocked handsets for the masses, leveraging off Motorola’s deep carrier relationships. Of course we’ve still got a while to wait before this deal is finalized and we start to see the fruits that this relationship will bear but I’m positive this will lead to good things for everyone involved.

 

Microsoft Buys Skype: Solving Some of Their Mobile Woes.

Microsoft has a few ways it goes about building out a presence in a market. The first, and the most rare, is that the develop a product in house from scratch to compete directly in a market that’s currently booming. The most recent examples of these sorts of products are the Xbox and the Zune both wholly developed by Microsoft to compete in the gaming and portable music player industries respectively. The second way they establish themselves in a market is to buy out either the top competitor or one of the more successful competitors as they did for things like Softricity who were the leaders in application virtualization software. Lastly sometimes they’ll say they’re getting into a market but will never make any serious attempt to do so just to kill off any potential competition, which they attempted to do back when the iPad was still a rumor and they announced the Courier tablet which failed to materialize.

Whatever strategy they adopt to establish themselves in a chosen market there’s always one common theme to their approach: throw money at the problem until it becomes successful. Now this isn’t a strategy that every company can adopt (realistically only a minority can) but Microsoft is usually so flush with cash that they can afford years of losses without it posing any sort of risk to their core business. Most notably they did this for a good 7 years with the Xbox division before it managed to turn a profit, sinking billions of dollars into the product before it actually made them any sort of money. They also continue to do it for products like the Zune which continues to languish behind Apple’s iPod but that’s still got a couple years before it reaches the 7 year mark that the Xbox did, but there’s really little hope for that product.

Their latest endeavor which is seemingly flush with cash is their Windows Phone 7 product. Whilst the sales of the devices haven’t been that stellar they’ve still managed to take a small percentage of the smart phone market. Their partnership with Nokia sets the scene for them to become a potential juggernaut in this sector but they’ve got a long uphill battle ahead of them and the gamble isn’t a sure thing for either side. Microsoft now appears to be looking to strengthen their WP7 offering even further by shelling out a cool $8.5 billion dollars for everyone’s favorite communications app, Skype:

The deal is doneMicrosoft is buying Skypefor $8.5 billion in cash in its first sizeable acquisition since August 2008, when the Redmond software giant spent $486 million onGreenfield Online.

In fact, this is Microsoft’s biggest financial bet to date in terms of M&A, trumping its $6 billion+ purchase of aQuantive, which dates back to May 2007, in size.

The purchase price includes the assumption of Skype’s debt.

The agreement has been approved by the boards of directors of both Microsoft and Skype.

Whilst the acquisition is not solely dedicated to the WP7 product line it’s still the one that has the most to gain from it. WP7 doesn’t currently support any form of video calling like Apple’s FaceTime or Google’s Video Chat does and Skype could provide a good chunk of the underlying infrastructure, saving Microsoft a lot of work. Skype’s vision of being available everywhere lines up quite well with Microsoft’s three screens idea and I’m sure they’ll be looking to leverage Skype’s vast network to push their cloud products further. Still one has to wonder if the $8.5 billion price tag they paid for Skype is worth it, considering its Microsoft’s biggest acquisition to date.

When I first heard of the news that Microsoft had bought Skype my first reaction was that this was a maneuver to deny Facebook the chance at getting it. There were rumors of Facebook testing the waters of an acquisition for a while but it seems that in the end the only serious bidders were Microsoft and Google. It then becomes clear that Microsoft simply did not want the Skype network in the hands of one of its largest competitors and Facebook was probably not that interested in the first place, especially if Microsoft (who owns 1.6% of Facebook) was going to pony up the cash for them anyway. Google might not have been completely serious about their offer anyway since they already have most of what Skype has to offer and might have just been making sure Microsoft spent more than it had to (hey they’ve done it before).

It will be interesting to see how Microsoft leverages this investment, especially with its current product lines that have direct synergies with Skype. They’ve certainly been doing all they can to make sure their mobile sector succeeds and if Gartner is to be believed then we’re less than 4 years away from them becoming the dominant platform. I’m not so sure about that idea but I do know that Microsoft does have the resources to throw at this problem until they become big in this sector, and the Skype acquisition is a testament to that fact.