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Why Google bought Global IP Solutions

The strategic answer is Android. The flip answer is "because it could." There's something to the flip answer.
Written by Dana Blankenhorn, Inactive

The strategic answer is Android. The flip answer is "because it could."

There's something to the flip answer.

Global IP Solutions (GIPS) signed a deal to provide its technology to Motorola's Android phone just last week. GIPS had anounced its VideoEngine for Android in April, becoming the first to offer voice chat on the platform.

(GIPS spokesman John Gallagher used this caricature on his blog post announcing the deal. Before joining GIPS in 2006 Gallagher edited The Irish Herald and before that ran interference for Macrovision, now part of Adobe. Note Gallagher's green jacket. I'm O'Donnell on my mom's side.)

The deal covers GIPS' VoiceEngine Mobile software, which was also added a week ago to LG's Fixed Mobile Convergence bundle. At the time of that deal, LG explained that GIPS' Acoustic Echo Cancellation (AEC) implementation was crucial to improving the quality of voice calls.

Separately GIPS signed a deal with Cisco's WebEX unit, which does videoconferencing. On signing of that deal May 10 it was noted GIPS has over 20 patents pending or approved.

There are other good strategic fits, as Stephen Shankland of CNET notes in his DeepTech piece about the deal. He called GIPS a "VoIP and videoconferencing" company. Very true. GIPS' technology is inside AOL and Yahoo's videoconferencing offerings.

Which brings us to the flip answer.

Google is paying a 27% premium on GIPS' current price, making its Scandinavian VCs, Kistefos Venture Capital AS and Kistefos Venture Capital II DA, pretty happy. But even with the premium, the total price is $68 million. Google is paying cash. For a company worth north of $162 billion, that's seat cushion money.

Nonetheless there was hard bargaining. Marketwatch reports GIPS last traded in January, saying at that time it would be "making a public announcement of strategic interest from a potential buyer." The price is 142% over the price at that time. Other media outlets reported the lower premium based on the more recent close.

This too is good news for Google. The last thing you want to look like when your pockets are stuffed with cash is like someone whose pockets are stuffed with cash looking for a good time. Google is in the position Yahoo was in during the 1990s, when then CEO Tim Koogle (no relation) made people like Mark Cuban billionaires.

Given that all these deals were announced long after GIPS announced it was negotiating the sale of the company, my guess if everyone knows who they were really dealing with all along. Google didn't just swoop in on folks who were running away.

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