Motorola an albatross around Google's neck

Last summer, when Google announced it was buying Motorola, we were not optimistic about the combination.

Why not?

Because unlike most observers, who assumed that Google was just buying a big bag of patents and planned to divest Motorola's actual business the instant they acquired it, we were concerned that Google CEO Larry Page might actually want to make phones.

And we're still concerned about that.

For the last five years, Larry's words and actions have shown that his philosophy is to make big bets on things that he considers cool, whether or not they mesh well with Google's core business or competencies.

For example:

• Self-driving cars
• Wind power
• (And, to a lesser extent) fiber-based Internet access (in Kansas City)

So we think that Larry just might be crazy enough to want to make phones and tablets.

Meanwhile, Apple still makes better smartphones and tablets than any other gadget-maker in the world (at least in the minds of Apple devotees) and says that this superiority is based on its ability to control both hardware and software.

So we think Larry might be gazing longingly at Apple and thinking, "Hey, I want to do that, too."

Put all that together, and we continue to think that Google's Motorola acquisition might not, in fact, have been the purchase of a bag of patents, but Google's entry into the smartphone and tablet manufacturing business.

And if that's what it was, be careful what you wish for.

As evidenced by its crappy Q4, Motorola is a huge, sick elephant. It is a huge, sick elephant in a completely different business than Google's. And it will be climbing aboard Google's back at a time when its business is rapidly deteriorating.

Deteriorating businesses, especially huge and complex ones, are a major distraction, even when management is committed to running them "as standalone companies," which Google has said it plans to do.

When "standalone companies" are acting as cement shoes, dragging the core company down, management tends to spend some time worrying about that and trying to fix them. And this distraction may end up costing Google a lot on top of the $12 billion it spent buying the company.

We assume that the way Google looked at the Motorola buy was this:

We get a huge bag of patents and an operating business for cheap. If we decide we don't want to be in the operating business, we'll just dump it. Even if we dump it at a major loss, the deal will still have been worth doing because we needed the patents and we've got cash coming out of our ears.

And that's a reasonable position. We think it underestimates the distraction of closing the deal and owning Motorola's business even for a short time, but if that's what Google's intention is, fine.

If Larry really does want to make phones, however, we're officially worried.

Making phones is hard. Making phones will put Google into direct competition with its Android hardware partners. Making phones and tablets will require Google to develop a huge amount of logistical and manufacturing expertise that it currently lacks.

If Larry wants to make phones, moreover, there are much cheaper, easier, and less risky ways to do it than trying to fix Motorola.

For example, Larry could have invested $5 billion of cash in a new phone-manufacturing company; one that wouldn't have come with any of the problems and baggage that Motorola comes with.

Anyway, last week, Motorola confessed that it had screwed the pooch in Q4, news that could not have been welcome news in the Googleplex.

And make no mistake: Motorola screwing the pooch is no longer Motorola's problem. It's Google's.

More from Business Insider:
The truth about Google-Motorola: It could be a disaster

Copyright 2012 by Business Insider, Inc. All rights reserved. Reproduced with permission from Business Insider, Inc.

Source: http://www.msnbc.msn.com/id/45932735/ns/business-us_business/

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