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Samsung execs are probably dancing a little jig right about now.
Google late Wednesday confirmed that it’s selling Motorola Mobility to Chinese PC giant Lenovo for $2.91 billion, or less than a quarter of what it paid for the handset vendor in 2011. Motorola has brought nothing but troubles (and a lot of patents) to Google, with the company steadily losing money and market share. It also has caused headaches for other Android smartphone makers, especially Samsung.
When Google first announced less than three years ago that it was buying Motorola, Samsung and the rest of the Android camp publicly applauded the deal, saying it would be good for the industry. Privately, however, they fretted about competing against their biggest partner and questioned whether Google would start favoring Motorola. For Samsung, that was a particular worry.
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The company in 2009 made a huge bet on Android and put its full heft behind the operating system. It released phone after phone until it had a hit with its Galaxy S line, and it soon became the top Android vendor on the market. Last year, one out of every three smartphones on the planet — not just Android — came from Samsung, and more than half of Samsung’s revenue in 2013 came from its mobile devices. The vast majority of those products used Google’s operating system.
Reports of tensions between Samsung and Google, however, emerged last year. Both were reliant on the other for their success in mobile, but neither liked being so dependent on another company. The worst-case scenario in either direction was dire: If Google took action to prop up Motorola with early access to versions of Android, the handset maker would gain an unfair advantage over Samsung. If Samsung suddenly abandoned Android, Google would lose its biggest vendor partner.
Of course, none of that came to pass. And the worst-case scenario was never really a legitimate risk. Still, it was a big enough concern that Samsung put some of its resources behind its own operating system, called Tizen.
Now that Motorola is out of the picture, things can get cozy again between Google and Samsung. Google is no longer competing with all the Android vendors on the planet, at least not in smartphones. It also could seek out Samsung more often for partnerships, such as releasing devices that provide a purer Android experience.
Samsung has tended to layer its own interface and apps on devices in the past, but it may now be more willing to work with the specifications Google desires. Reports have already emerged that Samsung will be scaling back the bloatware on its devices. It’s unclear what Samsung got in exchange for that pledge, but ready access to Motorola’s old patents, now owned by Google, could be one factor.
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Of course, a better relationship with Google doesn’t mean that things will be completely smooth sailing for Samsung. There will likely always be some level of tension between the two. Samsung realizes that more value will come from software and services in the future, so it won’t give up on Tizen entirely, nor will it completely stop employing its own software touches to allow its devices to stand out from the pure Android pack. It also will still want some leverage over Google and a backup in case things go south with Android, with Tizen acting as a last-ditch fail-safe.
“Anytime you go all in with any partner who holds all the strings is a dangerous situation,” said Jan Dawson, Jackdaw Research chief analyst. “Dumping Motorola makes Google a friendlier partner, but Google still makes decisions in what goes into Android and what you can layer on top.”
However, Samsung likely won’t feel the same kind of urgency to become a software expert overnight.
And while Samsung’s not competing with its partner in handsets anymore, it’s now facing an even stronger and more determined rival in Lenovo. Google might not have done all it could with Motorola for fear it would upset Samsung, LG, and all the other Android vendors. Lenovo, however, won’t have that same concern.
Lenovo, which bought IBM’s computer business nearly a decade ago, is the world’s biggest PC vendor, but that’s not its only ambitions. The company now wants to become the biggest seller of smart devices, which includes PCs, tablets, smartphones, and smart TVs. Already, the Motorola deal boosts Lenovo’s standing in the smartphone market to third place behind Samsung and Apple, up from its fifth-place ranking on its own, according to Strategy Analytics. However, its new market share of about 6 percent is far below the 32 percent stake held by Samsung.
Even with a stronger Lenovo, there’s no doubt that Samsung would much rather spar with a known rival than compete with the partner whose operating system drives so much of its growth. And Lenovo has a long way to go before it really starts to rival Samsung’s position in phones.
For now, Samsung, enjoy your giddy little dance.
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