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BLOG: Mobile in chaos -- Has the industry gone nuts?

Mike Elgan | Aug. 21, 2011
The answer is clearly yes. But why? (Hint: Blame Apple.)

Google wants it both ways. The company announced this week that it has agreed to purchase the mobile phone pioneer Motorola for $12.5 billion in cash. Google intends to keep Motorola functioning as a separate company.

While the deal was motivated primarily by Google's desire to fortify its patent portfolio, the purchase puts Google in a strange and unprecedented relationship with both itself and its OEM partners. In effect, Google becomes both partner and competitor to current Android-based handset makers. And Google becomes its own partner. Motorola will continue making Android-based phones and tablets.

Everyone patents up and sues like crazy

Microsoft is suing Barnes & Noble, Foxonn and Inventec. Oracle is suing Google. Sony is suing LG. Samsung, Motorola, Nokia, HTC and Kodak are all suing Apple, and Apple is suing them all back except Kodak.

To win these lawsuits, and to bolster licensing negotiations, the biggest players are buying any company they can that is sitting on a sizable mobile patent portfolio.

And thanks to previous lawsuits, Microsoft is making more money from Android than Google is. The company licenses technology in Android that Microsoft claims to have invented to Amazon and HTC.

Patent trolls have emerged that do nothing but buy and sell patents -- and sue companies that violate inventions they had no hand in inventing.

The U.S. patent system is crazy. And because mobile devices are the most complex consumer products in existence (and have the most patentable components), the crazy system is making everybody do crazy things.

Has the industry gone nuts?

The mobile industry is going bonkers in part because mobile is becoming central to everything we do in our lives, yet only one company is making big profits on it: Apple.

Hundreds of companies make cell phone handsets, including some of the largest consumer electronics companies in the world. Yet Apple by itself makes about two-thirds of all profits from handsets. That means Apple makes twice as much profit as all other companies combined.

Apple's success in mobile has made the company the first or second most valuable company in the entire world, depending on the vagaries of the stock market.

Apple makes big profits from hardware, big profits from its own software, big profits from other people's software, big profits from carriers and pretty good profits from advertising on those mobile devices. Nearly three-quarters of Apple's revenue come from mobile devices launched in the past decade.

And Apple hasn't even signed its deal yet with the world's largest carrier, China Mobile, which has more than 600 million customers in a country that's already hungry for the iPhone.


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