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Is the Google deal about Larry Pages’ desire to become the best strategist in the world?

Posted in Board Of Intellectual Capital, boic, Business models, Economy, Intellectual capital, internet, Investments, Market research, Social Networks, Strategy, tagged , , , , , , , , on August 16, 2011| Leave a Comment »

By Tony Fish, AMF Ventures and member of Gerbsman Partners Board Of Intellectual Partners.

The changing face of mobile

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Surprised at the latest Google deal to acquire Motorola Mobility for $12.5Bn, you should not be; Eric Schmidt was very clear back at MWC in FEB 2007 “Mobile Mobile Mobile” and since then Google has focussed both time and effort to deliver andriod (which was itself acquired).  When Schmidt stepped down in saying “ adult supervision no longer required” this left open the matured Larry Page to step up from being great at maths and a world leading entrepreneur, to take on the mantel of “world leading strategist and deal doer.”

This deal will be the discussion point for the next 3 months and already there are a lot of views circulating about what it means but there is no doubt that depending on your stance you can argue for change. However at Mobile 2 on 1st Sept in SFO – we get the first bite, why not join in. 

The Deal

Google purchased Motorola’s mobile business for $12.5 billion. In doing so, Google brought patents, hardware design, manufacturing and a seat at the patent table. However the context is… Oracle suing, Apple winning, eco-system struggling, Samsung annoyed and Microsoft attacking

Worthy of Note

Google has bought in cash and not shares.  This commitment will reduce their cash balance to $22bn from the mid thirties, but it is cash.  Given the issues that cash purchases delivered to telecoms in 2000/2001 this is an important fact as many ran into immediate issues and sold off key assets.  However, I expect the reason that this is cash is that Google are not expecting to hold the operational assets for long.  An equity purchase could have caused them problems from shareholders when they flip it assuming it completes in Q1 2012

Why now?

Porter 5 forces model is helpful here as it highlights the dynamic nature of the mobile market that Google faces.  Their power is low, their service fragmented and  they are being attacked.

Implications

This deal will be the discussion point for the next 3 months and already there are a lot of views circulating about what it means but there is no doubt that depending on your stance you can argue for change. However at Mobile 2 on 1st Sept in SFO – we get the first bite, why not join in.

Starting from the view of the world formed by ….

  • Operators – Deal does not change anything as we are the controllers of mobile – we keep all manufacturers below 30% market share and make sure it is a competitive supply market.  However, we are still worried about becoming bit pipe….
  • Oracle/ Sun/ Java – Defence needed as android has been beset with legal challenges from all sides, including a multibillion dollar lawsuit filed by Oracle, but Motorola patents are about wireless tech and unlikely to help.
  • Apple – By purchasing a manufacturer, Google has admitted it needs more than just a free operating system and loads of partners to compete with Apple: they need to duplicate Apple’s successes by totally controlling both the hardware and software of their devices.
  • OEM ‘s –  “Google has gone from partner to competitor.”
  • Media/ Content owners – According to Infonetics, Motorola Mobility was the leader in set-top box revenues last year, and was also tops in hybrid IP/QAM set-top boxes — that is, the boxes used by operators like Verizon that combine broadcast TV and over-the-top applications. By leveraging Motorola’s position with carriers, Google can better solidify its bid to expand Google TV and Android into the living room.”
  • Developers – At least there is one less system to deal with.

Scenarios and outcomes

  • The production shop – In this scenario Google keeps Motorola as is and starts to manufacture it owns handsets.  In reality this could provide short term stability to the fragmented andriod market place and show case devices and move into other screen based markets, but in the long run looks like a new Apple and being open is probably not a true option. Probability in long run 10% as this would not elevate Page to world class strategist who is just following Jobs view of the world.
  • The negotiator tactic –This is the company official line that the acquisition brings 17,000 patents (but are they relevant) to Google and enables them to robustly defend their mobile position and also expand.  It is a $12.5bn investment to get a seat at the table.  Strategically there is a lot of truth in this as mobile will dominate long term strategy and value. Probability in long run 25% as patents only last for a period….

Power to disrupt

Imagine Google takes the patents, yes they are useful to defend/ negotiate but also to empower others if free and open. This would reduce the power of others in the market and change the dynamics

Imagine Google keeps the patents and sells on production to Samsung to create a global partner across all screens

Imagine Google Wallet becomes the model – forget small transaction fees – lets go for user data in every model

Probability in long run 65% and Larry Page is now the best strategist in the world and did it without adult supervision.

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Guess who else wanted to buy Motorola?

Posted in Board Of Intellectual Capital, Business models, Economy, Investments, Market research, Strategy, Technology, tagged , , , , , , , on August 15, 2011| Leave a Comment »

Article from GigaOm.

Google may not have had much of a choice when it came to buying Motorola Mobility for $12.5 billion. If it didn’t, someone else would have and that would have put the company in an even bigger patent hole.

Our sources say that Motorola was in acquisition talks with several parties, including Microsoft for quite some time. Microsoft was interested in acquiring Motorola’s patent portfolio that would have allowed it to torpedo Android even further. The possibility of that deal brought Google to the negotiation table, resulting in the blockbuster sale.

Motorola found a Google deal more digestible because Microsoft had no interest in running a hardware business and was essentially interested in Motorola’s vast collection of patents. Google moved aggressively, and at $40 a share, Google is now paying a 60 percent premium to Motorola’s recent stock price. The deal it struck gives it access to Motorola’s strong portfolio of 17,000 current patents and 7,500 patent applications across wireless standards and non-essential patents on wireless service delivery.

The high-level talks between Google and Motorola started about five weeks ago. Google CEO Larry Page and Motorola CEO Sanjay Jha were talking directly, and only a handful of executives were brought into discussions. Our sources suggest that Android co-founder Andy Rubin was brought into the talks only very recently.

My view is that while Google might have won the battle, in the long run it has put the Android ecosystem at risk. Mobile industry insiders view this as a ray of hope for Windows Mobile Phone 7 to sign-up the disillusioned handset makers who at this point must be reworking their mobile OS strategies.

Read original post here.

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Apple flirts with ranking of biggest company

Posted in Board Of Intellectual Capital, Business models, Economy, Investments, Market research, Strategy, Technology, tagged , , , , , , , on August 10, 2011| Leave a Comment »

Article from SFGate.

“Apple sliced through the competition to briefly become the most valuable company in the world Tuesday, as its market capitalization surged past No. 1 Exxon before settling slightly lower.

The Cupertino company closed the day with its stock up 5.9 percent to $374.01 per share, valuing it at $346.7 billion. Exxon, the Texas oil giant, ended the day with a value of $348.3 billion.

It capped an astonishing turnaround for a company that founder Steve Jobs has said was weeks from bankruptcy when he returned as CEO in 1997 and focused the company on a handful of key products.

Apple’s stock price has gone up nearly 35 percent in the past year, reflecting heightened confidence among investors in its line of computers and mobile devices. In its most recent quarter, the company posted a record $28.57 billion in revenue as sales of the iPhone, iPad and notebook computers soared.

The company’s growth is particularly strong in the Chinese market, Apple Chief Operating Officer Tim Cook told analysts last month. International sales accounted for 62 percent of Apple’s revenue in the last quarter.

The company is expected to continue growing in the near term, analysts predict. A new iPhone is expected in the fall, and analysts say Apple might also introduce a lower-cost model that would help the company reach a lucrative new market.

Sales of the iPad continue to soar. Apple sold 9.25 million of the tablet computers in the last quarter, a 183 percent increase over the same period in 2010.

“On the iPad side, they’re so far ahead of the market that none of the Android or other tablet competitors have really made much of a dent in their market share,” said Charles Golvin, an analyst with Forrester Research. “‘Tablet is still essentially synonymous with ‘iPad.’ ”

It was less than two years ago that Apple joined the list of the 10 most-valuable U.S. companies. Since then, it has made a rapid ascent, surpassing Microsoft last year to become the world’s most valuable technology company.

Less than a month ago, Exxon was worth more than $50 billion more than Apple. Exxon’s market value declined as investors became pessimistic about prospects for economic growth, which drives demand for oil.”

Read more.

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EBay’s Zong deal heats up mobile-payment battle

Posted in Board Of Intellectual Capital, Business models, Economy, Investments, Market research, mobile 2.0, Mobile Phone Usage, Strategy, tagged , , , , , , , , , , , , , , , , , , , , , , , on July 14, 2011| Leave a Comment »

Article from SFGate.

“EBay Inc.’s purchase of mobile-payment startup Zong Inc. for $240 million is stepping up pressure on companies such as Google Inc. and American Express Co. to make their own acquisitions in the market.

Google has held exploratory discussions with mobile-payment startups, according to two people with knowledge of the meetings. Credit card companies, including American Express and Visa Inc., also are meeting with takeover candidates, though deals may not be imminent, people familiar with the talks said.

More consumers are looking to pay for things like movie tickets, apps and other items with their phones – rather than cards or cash. That’s pitting financial-service providers, which benefit from transactions, against technology companies like Google. Both sides aim to use mergers and acquisitions to shore up their positions, said Richard Crone, who runs Crone Consulting LLC, a firm focused on mobile banking and payments.

“There’re much more M&A and roll-ups to come in this space,” Crone said. “You will see the activity happening before the end of the year.”

The total value of mobile payments will reach $670 billion by 2015, up from $240 billion in 2011, according to Juniper Research. That includes transactions for digital and physical goods, money transfers and payments using near field communication – a wireless technology that lets users tap their phones against a reader to make a purchase.

Mainstream acceptance

Many companies are shopping for startups that help users charge purchases to their phone bills. Within a year, 40 percent of all U.S. mobile subscribers will put items other than ring tones on wireless bills, according to Chetan Sharma, an industry analyst in Issaquah, Wash. That’s up from 30 percent now.

Potential acquisition targets include Boku Inc.; Payfone Inc.; BilltoMobile, which is majority-owned by Danal Co.; and Amdocs Ltd.’s OpenMarket Inc., Sharma said.

Syniverse Technologies Inc., MindMatics AG’s Mopay unit, Bango and Vindicia Inc. could be candidates as well, according to Crone. Acquisition targets will sell for 10 to 20 times their trailing 12-month sales, he said. It’s unclear how that measures up against the Zong deal because eBay didn’t disclose the startup’s revenue when it announced the purchase last week.

Still, some startups may struggle to attract a deep-pocketed suitor or land that kind of premium. And large technology and finance companies may choose to develop the capabilities themselves.

‘Pressure to act’

Representatives from Google, American Express and Visa declined to comment on any potential deals, as did Bango, Boku, Payfone, Syniverse and Vindicia. OpenMarket didn’t respond to requests for comment.

Ingo Lippert, CEO of Palo Alto’s Mopay, said the Zong deal will likely give rise to more acquisitions, though his company is “solely focused” on operations.

“We’ve been forecasting consolidation within the mobile-payments space for some time,” Lippert said in an e-mail. “With Zong’s acquisition, companies testing out solutions within the mobile-payments market will now feel increased pressure to act.”

Investments in payment startups began picking up several months ago. In February, Visa agreed to spend about $190 million, plus performance incentives, to purchase PlaySpan Inc. The company handles purchases of virtual goods in online games and social networks. In April, American Express led a $19 million funding round in Payfone, a developer of a mobile-payment service.

EBay’s buying spree

Last year, eBay acquired Red Laser and Milo, two comparison-shopping applications that allow users to scan product barcodes and read reviews. With Zong, the company will get a bigger foothold for its PayPal payment service on phones, especially in developing countries.

Zong lets people pay for things by putting them on their mobile-phone bills. That’s attractive in emerging markets, where credit card adoption is low.

“The phone is ubiquitous, and credit cards are not,” Rodger Desai, CEO of Payfone, said.

U.S. carriers lets third-party services such as BilltoMobile operate on their networks. Verizon Wireless, for instance, allows charges of as much as $25 a month. BilltoMobile also declined to comment on whether it was a takeover target.

Carrier bills contained $3 billion worth of charges for virtual goods last year, and these charges are rising at 38 percent annually, Crone estimates. Those purchases can include ring tones, dating-site subscriptions and weapons for mobile video games.

Purchases of apps charged to wireless bills reached $5 billion last year and are growing at 68 percent a year, Crone said. Consumers in countries such as South Korea are increasingly charging physical goods to carrier bills as well.

“We are seeing very rapid growth,” said Jim Greenwell, CEO of BilltoMobile.”

Read more here.

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“Terminating/Restructuring Prohibitive Real Estate, License, Payables & Contingent Liabilities” – – – “Maximizing Enterprise Value” through proprietary “Date Certain M&A Process”

Posted in Board Of Intellectual Capital, Gerbsman Partners, Investments, Marketing, tagged , on July 11, 2011| Leave a Comment »

Gerbsman Partners has been involved with numerous national and international equity sponsors, senior/junior lenders, investment banks and equipment lessors in the restructuring or termination of various Balance Sheet issues for their technology, life science, medical device and cleantech portfolio companies. These companies were not necessarily in Crisis, had CASH (in some cases significant CASH) and/or investor groups that were about to provide additional funding. In order stabilize their go forward plan and maximize CASH resources for future growth, there was a specific need to address the Balance Sheet and Contingent Liability issues as soon as possible.

Some of the areas in which Gerbsman Partners has assisted these companies have been in the termination, restructuring and/or reduction of:

  • Prohibitive executory real estate leases, computer and hardware related leases and senior/sub-debt obligations – Gerbsman Partners was the “Innovator” in creating strategies to terminate or restructure prohibitive real estate leases, computer and hardware related leases and senior and sub-debt obligations. To date, Gerbsman Partners has terminated or restructured over $795 million of such obligations. These were a mixture of both public and private companies, and allowed the restructured company to return to a path of financial viability.
  • Accounts/Trade payable obligations – Companies in a crisis, turnaround or restructuring situation typically have accounts and trade payable obligations that become prohibitive for the viability of the company on a go forward basis. Gerbsman Partners has successfully negotiated mutually beneficial restructurings that allowed all parties to maximize enterprise value based on the reality and practicality of the situation.
  • Software and technology related licenses – As per the above, software and technology related licenses need to be restructured/terminated in order for additional capital to be invested in restructured companies. Gerbsman Partners has a significant track record in this area.

Maximizing Enterprise Value – Gerbsman Partners proprietary “Date Certain M&A Process”

Gerbsman Partners developed its proprietary “Date Certain M&A Process” in 2002. Since that time, the process has evolved into a 6-8 week time frame vehicle for maximizing enterprise and asset value for under-performing venture capital and senior lender backed medical device, life science and technology Intellectual Property based companies. To date, Gerbsman Partners has maximized enterprise and asset value for over 68 of these companies. A description of this proven process can be reviewed on the Gerbsman Partners website.

About Gerbsman Partners

Gerbsman Partners focuses on maximizing enterprise value for stakeholders and shareholders in under-performing, under-capitalized and under-valued companies and their Intellectual Property. Since 2001, Gerbsman Partners has been involved in maximizing value for 68 Technology, Life Science and Medical Device companies and their Intellectual Property,, through its proprietary “Date Certain M&A Process” and has restructured/terminated over $795 million of real estate executory contracts and equipment lease/sub-debt obligations. Since inception, Gerbsman Partners has been involved in over $2.3 billion of financings, restructurings and M&A transactions.

Gerbsman Partners has offices and strategic alliances in Boston, New York, Washington, DC, Alexandria, VA, San Francisco, Orange County, Europe and Israel. For additional information please visit www.gerbsmanpartners.com or Gerbsman Partners blog.

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