I was highly skeptical at first about a rumor that Google (Nasdaq: GOOG) might be in talks to sell its Motorola Mobility (NYSE: MMI) handset business to telecoms equipment and cellphone giant Huawei; but the more I think about it the more it makes sense, leading me to speculate that the rumor may actually be true. The source of all the buzz is actually quite small, namely a small mention at the very end of a Wall Street Journal article in which the author simply says that rumors are swirling that Google has already offered to sell its newly acquired Motorola handset business to Huawei, even though it also cites a person close to Google denying any such talks. But regardless of what people are saying, such a deal would make good sense for both Google and Huawei, and here’s why. For its part, Google is an Internet and media company first and foremost, and has little or no experience in the highly competitive and lower margin cellphone business. Most believe the only reason Google even purchased Motorola’s handset business at all was to get the company’s extensive patent portfolio, which it hoped to use in its legal battle with Apple (Nasdaq: AAPL) involving Google’s Android cellphone operating system. From Huawei’s perspective, such a purchase would also look attractive since Huawei has made a recent major drive into handsets as it tries to diversify away from its traditional networking equipment business. Motorola would greatly help that drive, as the brand, while somewhat tarnished in recent years, is still globally recognized, and also has well-developed international sales and distribution channels that Huawei could instantly tap. (previous post) There’s one other factor as well that is less obvious but involves a complex history between Huawei and Motorola. The 2 companies previously collaborated in the networking equipment business many years ago, and that collaboration led Huawei to sue Motorola when the latter sold its networking equipment business last year to Nokia Siemens Networks. The pair eventually resolved the lawsuit, and, in a development that appeared to be related, China’s anti-monopoly regulator approved the Motorola sale to Nokia Siemens a short time later after a long unexplained delay. (previous post) The current talks, if they’re really happening, would share a number of similarities with the Nokia Siemens case, as both involve Motorola and Huawei. Furthermore, China’s anti-monopoly regulator has also delayed approving Google’s purchase of Motorola for unexplained reasons, holding up the deal that has cleared regulatory approval in all other major markets. (previous post) It’s difficult to know what’s happening behind the scenes, but I wouldn’t be at all surprised if the Chinese regulator’s delays are somehow related to ongoing talks by Google for a sale of the handset business to Huawei. Of course something like that would never happen in the west, where regulators would never get involved in a deal between 2 private companies. But China isn’t the west, and so really anything is possible.
Bottom line: A rumor that Huawei is in talks to buy the Motorola handset business from Google could well be true, as such a deal would make good sense for both companies.
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