Google Inc. boss Larry Page says his company has agreed to pay $12.5 billion for Motorola Mobility, mostly to gain control of patents that would help defend its Android smartphones from rival Apple and its iPhones.
From Wall St. to Silicon Valley, a lot of telecom-watchers are buying that line. "Google's primary objective is to acquire Motorola's sizeable patent portfolio," Raymond James & Assocs. analyst Todd Koffman told clients in a report today. Motorola's other businesses - its money-losing phone-making unit and its Horsham-based video-equipment arm -- might add "potentially valuable growth," but "Google's core interests lie outside equipment, and we expect the company may divest" both the phone manufacturing business and the Horsham video-equipment plant "within the next few years."
But some telecom-watchers say Google has a much deeper strategy in play -- and that Motorola's Horsham plant, which currently makes set-top cable TV boxes and cable-to-wireless video equipment for Comcast and other TV players, is at the heart, not the edge, of the $12.5 billion deal.
"Much of the Street's focus may be on the implications in mobile" phones, but Motorola's video products "are much more interesting,"  analyst Tony Wible wrote today in a report to clients of Philadelphia-based Janney Capital Markets. For Wible, the Google deal, along with its purchase of video-Internet software maker Sage TV earlier this summer, confirms the search and advertising giant's "growing interest in TV and mobile, as these become portals for search, instead of computers."

As Comcast showed when it bought NBC Universal, "owning content and interface technology" will become more valuable, while running video distribution services (like cable systems or Netflix) will be a mere low-priced "commodity," as more people watch TV online, Wible added. But first, someone needs to develop "a one-box (Internet Protocol) TV platform." That someone will likely be Google, once it buys Motorola Mobility, possibly making it "a threat" to some TV programming companies, Wible wrote.

Observers are "focused on patent acquisition," which is important, but it's also "exactly what the Google press machine wants" us to think about, said Kevin Ryan, chief executive of Motivity Marketing, an online ad consultant. "Google seeks control, especially a communications pathway over the (TV) set-top, or any other hardware communications pathways, to Internet-based advertising."

By making both wireless phones and video systems, Google can bypass the confused "bloatware, restrictive formats and failed devices" that keep consumers welded to TVs, Ryan told me. Better Google Android online and wireless video "will open more long-term revenue channels," and that will help keep Google rich and growing, even if the government eventually breaks up Google's its dominance of online search technology.

"Google doesn't need to dominate" the mobile phone subscription business "to make money," Mark Naples, managing partner of Philadelphia-based Wit Strategy, told me. The combination of cheaper, more reliable Android phones, "plus Google Apps plus Adwords, will change the mobile market a good deal" by forcing video users through Google ad systems. "As soon as Google employs Voice-over-Internet Protocol on their Droid platforms, people will regard this acquisition as having been pure genius."

But before any of this comes to be, Google has to get the deal past federal officials in the face of aggressive opposition by its potential corporate rivals. "It's going to be messy," Ryan told me. "Google will have to deal with this antitrust thing. The lobbying that's happening in DC now makes (convicted influence peddler) Jack Abramoff look like Mahatma Gandhi."