The financial performance of handset, tablet and set-top box maker Motorola suggests that it won't add $12bn (including $3bn of cash) in value to Google's business. But how can Google possibly earn its money back from patents?
Google intends to buy Motorola Mobility (MMI) for $12.5bn. Is it a good deal? Following the announcement of Motorola's financial results for the fourth quarter, we can take a view. From the purely financial viewpoint, the simple answer is: no.
Judging by the numbers, owning MMI will be a significant drag on Google's profits - by about 10 percentage points, making its earnings per share around one third smaller. In profitability terms, the merged company won't actually make any more profit than before. It might even make less.
I thought this was an interesting assessment of the Google/MMI deal.
It certainly looks at the issue from a very different perspective. My take is a bit different. By acquiring the company Google are able to enhance their mobile product offereings within the Motorola mobility range. Even if Motorola breaks even, there is still the potential for Google to generate revenue simply via the use of Google products.
I don't think Google ever buys a company with an intent to make more profit from them? Usually they absorb the company to either make a competitor go away or to get more data on web users... the odd time they take the product and launch it as one of their own "free" products...