Google selling off Motorola set-top box unit? Here's why it shouldn't

A new report suggests that Google is already planning to jettison Motorola's set-top box unit, which seems either unlikely or a foolish decision.
Written by Rachel King, Contributor on

Just a few months after the deal closed, Google is reportedly already planning to break up Motorola Mobility and sell off some parts, according to a memo from Light Reading Cable.

In the memo, LRC editor Jeff Baumgartner writes that Google is planning to sell of the set-top box unit, in particular, as the bidding process would get started in September with hopes for a deal completed by the end of the year:

Multiple industry insiders and people in cable M&A circles confirm that Google has not yet started the formal sales process for the Home division, which makes and sells cable modems, set-tops, video processors, edge QAMs, cable modem termination systems (CMTSs) and video navigation software. However, there's strong consensus that Google will put Motorola on the block, though there's some variance on when the process will officially get underway. Barclays Capital is rumored to be the banker Google has hired for the sale.

This is disconcerting (and unlikely) for a few reasons, most of which center around Google TV. Here's why Google probably won't (or at least shouldn't) get rid of this important division of Motorola just yet.

The $12.5 billion merger closed this spring after Google originally made its bid last summer. Google has repeatedly argued that the acquisition was not just a patent deal (although critics counter that it largely was), but that doesn't mean that Motorola didn't bring other important assets to the table.

Following the merger, some of the biggest points on the to-do list really centered around hardware -- especially for the living room.

Think about it. Motorola's contribution to the Android OS mobile ecosystem hasn't really been all that great thus far. Most of the best Android devices (smartphones especially out there) come from other mobile OEM partners -- namely Samsung with the Galaxy series. Even the new Nexus 7, which is arguably the best 7-inch media tablet available right now, comes from Asus.

If hardware is actually on Google's mind, then the living room is where Motorola can help the most. Motorola already has a major presence in living rooms nationwide as many set-top boxes from cable providers are actually made by Motorola. Google has barely broken ground in this market on its own with Google TV-enabled devices, and the Nexus Q certainly isn't getting there anytime soon.

Furthermore, Google TV is starting to get notice again this year -- in a much more positive way -- thanks to partnerships with LG and Vizio as well as continuing work with Sony. Why not start to do some more stuff in-house? Many people thought that's what Google was planning to do with Motorola Mobility for smartphones and tablets, so it makes sense well enough for home entertainment devices too.

Google TV also had a much stronger presence at Google I/O in June than it did last year as the Internet giant continues to court developers to the platform with new tools and options.

Google also showed its dedication to its TV platform by inking a multi-year licensing agreement with Rovi for access to a patent portfolio that covers Rovi's interactive program guide for set top boxes, online media and mobile platforms. Rovi holds more than 5,200 patents (including pending ones) worldwide.

And on just a more competitive level, if Apple is going to dive deeper into the home entertainment scene like everyone expects with an actual TV of its own, Google is going to need to step up its own TV solutions as well. There's no way that Google would give up on the living room before this sector just becomes the next battleground in tech.

Therefore, it just doesn't make sense that Google would sell off Motorola Mobility's cable and set-top box technology at this point in time when there's so much that could be done with it. But if this report is true, then that could be a huge oversight (and blunder) on Google's part.

via Barron's

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