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Financial media is abuzz with the announcement of Google’s intent to acquire Motorola’s cellphone business in a deal valued at $12.5 billion.  The acquisition of Motorola Mobility Holdings Inc. is being touted as a response to Apple’s momentum in the smartphone markets and eventual possession of an arsenal of 17,000 patents held by Motorola in mobile technology. The deal, if approved, is expected to close in early 2012.

Another important implication however is Google’s access to a global supply, channel and supply chain fulfillment capability to produce and distribute smartphones and tablet devices. Readers will recall Google’s previous stumbles in late 2009, when it attempted a direct entry into the smartphone distribution channel by announcing the availability of the then announced unlocked Nexus One phone via an Internet ordering web site.  In our Supply Chain Matters commentaries at the time, we characterized Google’s effort as an attempt to dis-intermediate existing smartphone distribution and selling channels.  As anticipated, Google ultimately experienced multiple issues related to consumer difficulties in purchasing, activating and servicing their mobile phone purchases.  Contract manufacturer HTC, whom Google coerced into playing the role of global supply chain distribution and fulfillment, was placed in a rather challenging position. Eventually, Google pulled the plug on the grand experiment and withdrew that version of the Nexus One.  The intent was noble and classic Google, but the execution was naive.

With the acquisition of Motorola Mobility, Google has the opportunity to strongly influence the design of Motorola smartphones and tablets for tighter integration with the Android operating system. The deal opens the door for more options for search and online commerce, along with mobile computing needs for consumers and business. The path of innovative product introduction directly to consumers and businesses has the potential to become a lot quicker. Google also gains a global channel distribution network of mobile carriers which can help it compete with the likes of Apple or other competitors.  Consumers may have the option of an alternative to the likes of an iTunes online ordering site. Motorola could also become the premiere provider of Android mobile devices, while other manufacturers are offered different versions.

Congratulations to Google and Motorola on a savvy deal.  Supply chain and fulfillment capabilities may well prove to be instrumental for the combined companies in the coming years.

Bob Ferrari