Microsoft Mulled Motorola Purchase For Android Strike

Microsoft was reportedly one of several parties interested in acquiring Motorola Mobility, before Google managed to acquire the company for £7.7 billion.

Before Google struck, its Redmond-based adversary had reportedly been considering purchasing Motorola for some time in order to hit Android with more patent woes.

Patent Move

According to a report on GigaOM, which quoted its own sources, Microsoft wanted Motorola for its 17,000 strong patent portfolio, and 7,500 patent applications. This would have, says GigaOM, given the company more ammunition with which to torpedo Android and help further its Windows Phone 7 ambitions.

The publication also suggested that the possibility of that deal brought Google to the negotiation table, resulting in Google acquiring Motorola for a hefty chunk of money. In the end Google paid $40 (£24) a share to acquire Motorola, a staggering 60 percent premium on Motorola’s recent stock price.

A major reason why Motorola opted in the end for Google rather than Microsoft, was reportedly because Motorola’s management team recognised that Microsoft was not interesting in running a hardware business. It was simply after its patents portfolio.

Financially speaking, Motorola had been hit hard of late by product delays and poor sales of its Xoom tablet.

This led the company to report a second quarter net loss of $56 million (£34m) in July , compared with a profit of $80 million (£49m) in the same quarter last year. Sales however rose 28 percent to $3.3 billion (£2bn).

Delays And Price Cuts

Motorola had been struggling for a number of reasons. During the an earnings call in July, the company’s CEO Sanjay Jha warned  that Motorola’s 4G Bionic phone, a Long Term Evolution (LTE) smartphone for Verizon Wireless, would be delayed again until September. It had been expected to launch during the second quarter, after facing earlier delays.

A second setback was the revelation on 25 July that the price of the Xoom tablet in the United States had been cut from a hefty $799 (£489), through Verizon Wireless, to just $499 (£305).

That price cut was especially humiliating for Jha. He had confirmed the “premium” pricing of the Xoom back in February. Indeed, he actually pressed ahead with this pricing strategy despite a chorus of market and analyst warnings that it was too high.

Jha took the unusual approach of blaming the Apple iPad for being too good, to explain the high cost, but it is clear that this premium pricing for the Xoom backfired. Consumers were unwilling to pay a premium price for the Motorola tablet, compared to cheaper alternatives from Samsung, as well as of course, Apple with its iPad.

Motorola had already cut the price of the Xoom in April in the UK ahead of its launch.