Friday, 19 August 2011

Murders and Accusations

It's merger time again. Some of the world's biggest companies get on the financial merry go round, and buy some companies that really should have been left well alone, and to themselves. The acquisition of Motorola Mobility by Google and Skype by Microsoft has sparked off a whole new series of buyoffs, selloffs and general pandemonium. HP now wants to sell off its hardware business and get into software. It is prepared to pay 10 billion dollars to achieve the same. And this is from the largest personal computer manufacturer in the world, with over $130 billion in sales. Perhaps this is due to the higher margins available in software, and this has even been hinted by the top brass at HP. Assuming this to be true, we may conclude that companies invested heavily in software must be a lot more profitable than those invested in hardware or associated services.

And this is where we come into the tale of the two behemoths, Google and Microsoft.

There is a reason why Apple isn't even in on the picture, you see, for Apple is older, and currently bigger than either of the two. Apple has now become tremendously successful, after expanding its portfolio from the niche iMac, to the proletarian ipod. The battle now, is in between Microsoft and Google, lets say, and even here, it is David vs Goliath. For no matter what detractors say, Microsoft is clearly the larger of the two. Microsoft has a profit of $23 billion on revenues of 69 billion. Google comes a distant second, with an 8.5 billion profit on revenues of 26 bill. And google, is a software company looking to foray into hardware, which makes companies like HP look all the more tentative about their policies. Plus, Steve Jobs seems nowhere among the runners right now, and this translates to a certain Tim Cook, who did not have the best of first days at the helm of apple, struggling to find some flimsy thread of innovation in his company.

In truth, the highest form of work is intellectual work now, and while the great country of America has a tendency to reward truck drivers and construction workers, in India, we love our software engineers. This is where google scores, you see, for man to man Google has more creative, more inventive engineers. However, it ran out of its own creative solutions, especially in the Smartphone Space. What google has done now, is buy up as many patents as it can, with the acquisition of Motorola Mobility. It has acquired 2500 patents, at a cost of around $500,000 per patent. Which is only interesting because when Microsoft and Apple had bid for Nortel and Novell's patents..they managed to acquire them at $750,000 apiece.

While the Motorola Mobility deal was sealed at $12.5 bn, and guarantees Google access to mobile phone and smartphone markets, Microsoft have paid $8.5 bn for Skype, for software technology that is fast becoming redundant.

Ironically, Skype is being replaced by Google voice and video chat.

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