Is Google Turning Into a Mobile Phone Company? No, It Says

Back in 2004, Eric E. Schmidt, then Google’s chief executive, proclaimed, “We’re not going into the phone business, but we’re going to make sure Google is on those phones.” Less than a year later, however, Google did the opposite.

Google soon acquired Android, the mobile phone operating system, and began building a phone business that it has since developed into a juggernaut. Even after Google acquired Android in 2005, it continued to play down plans to enter the phone business for several more years. It wasn't until the summer of 2008 that Steven P. Jobs at Apple actually took notice and went to Google’s headquarters to inspect one of its prototype handsets. Google’s diversionary tactics made sense: by 2006, Mr. Schmidt, now Google’s chairman, was an Apple board member and Google was considered an important partner to Apple. But when Mr. Jobs finally saw Google’s phone he was “furious” and “concluded he was a victim of deceit." That history may be instructive to consider when judging Google’s $12.5 billion deal for Motorola Mobility, which makes Android phone handsets and TV set-top boxes.

If there’s any question about Google’s motivation to own a handset maker rather than just a portfolio of patents, consider this: InterDigital, a licensing company that owns some 8,000 wireless patents and has another 10,000 patent applications being processed, has been up for auction. Many industry insiders were sure that if Google were serious about acquiring a portfolio of patents, InterDigital would be its target. The company’s market value is only about $3 billion and it doesn't come with all the baggage of Motorola’s handset business.