Google Inc. Chairman Eric Schmidt said the $12.5 billion acquisition of Motorola Mobility Holdings Inc. may spur competition among phone makers using its Android software, and the company won't play favorites with its partners.
"The Android ecosystem is the No. 1 priority, and that we won't do anything with Motorola, or anybody else by the way, that would screw up the dynamics of that industry," Schmidt said in an Oct. 1 interview with Bloomberg Television's Erik Schatzker in Nantucket, Massachusetts. "We need strong, hard competition among all the Android players. We won't play favorites in the way people are concerned about."
Schmidt also said the 17,000 patents Google is gaining in the Motorola deal will "bulk up" its intellectual property and ultimately end legal battles among competitors in the $207 billion mobile-phone market. His comments come after analysts raised concerns that the Mountain View, California-based company's August announcement of its biggest acquisition had made it a competitor to its own handset partners.
Research firm Gartner Inc.'s Michael Gartenberg said the purchase was a "nightmare scenario" for handset manufacturers using the Android platform. Samsung Electronics Co. and HTC Corp. have phones running on Android.
Handset makers, which have been building devices with Google's operating system since 2008, may have a harder time cranking out bestselling devices because Motorola Mobility may get earlier access to the newest technology, said Gartenberg, based in San Jose, California.
Schmidt is looking to Android to help the owner of the world's most-popular search engine challenge Apple Inc. and Microsoft Corp. as more users access the Internet from mobile devices. The purchase of Motorola Mobility allows Google to better understand how to integrate its software with hardware while strengthening its patent portfolio amid legal battles with the two older technology companies.
In August, Google accused Microsoft, based in Redmond, Washington, and Oracle Corp., based in Redwood City, California, of waging a "hostile, organized campaign" against its Android mobile software. Apple, Microsoft and Google have ramped up spending on patent portfolios in recent months to gain exclusive rights to a broadening array of technology, much of it used in smartphones.
As bidding intensifies, prices for patents are surging, fueling concerns that portfolios are overvalued. Oracle sued Google last year, accusing it of patent infringement over the use of Java technology used in Android.
"From our perspective, we will end up having enough patents that we can end up with a rough truce with everybody else, which is how it's done," Schmidt said of Google's plan to "bulk up" on patents. "That's been the pattern in all other industries, and I'd expect something similar in ours."
It's "hard to know" when a truce might be reached, Schmidt said. Motorola's patent portfolio wasn't the most important factor in deciding to purchase the Libertyville, Illinois-based company, he said.
A group that includes Cupertino, California-based Apple and Microsoft beat out Google in June with a $4.5 billion bid for patents previously owned by Nortel Networks Corp., based in Mississauga, Canada.
Rivals are "banding together" to purchase patents they can use to charge fees that will make Android devices more expensive, David Drummond, Google's chief legal officer, said in August.
"The majority of the reasoning had to do with the fact that we benefit by having a hardware partner at Google who knows how to build the next generation of tablets and phones," Schmidt said.