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Google deal may shake up smart phone market

LOS ANGELES — Google's $12.5 billion agreement to buy mobile handset maker Motorola Mobility Holdings will probably trigger a shakeup — and shakeout — in the smart phone market.

As Google prepares to take on Apple and its iPhone, remaining handset makers may be forced to realign their allegiances, cutting deals to put new operating systems on their phones or buying firms themselves to gain valuable technology patents.

While Google wants to build its own devices to compete with the iPhone, it also wants control of Motorola's 17,000 patents to protect itself against patent infringement claims.

Competing software and handset makers may think they also need to bolster their patent arsenals, analysts said, because successful lawsuits can lead to huge damage awards and court orders halting sales of infringing devices.

"We could see more consolidation out of this, whether it's for patents or technology," said Shaw Wu, an analyst at Sterne Agee. The companies are "trying to position themselves for the next 10 years, and they want to make sure their businesses are not disrupted."

That could mean stronger firms such as Microsoft or Samsung snapping up patent-rich cell phone manufacturers that have fallen behind in the marketplace such as Nokia and BlackBerry maker Research in Motion.

RIM, in particular, could be left most vulnerable by the acquisition. Its once-dominant BlackBerry has been losing its grip on the global smart phone market for several years. The company's share of global sales fell to 12 percent in the second quarter from 19 percent a year earlier, according to research firm Gartner Inc. That's well behind Google's Android operating system, with 43 percent of the market, and Apple's iOS-powered iPhone, with 18 percent.

Microsoft, for one, might well be interested in RIM's more than 2,000 patents on such technologies as wireless e-mail, messaging and mini keyboards, said Scott Sutherland, an analyst at Wedbush Securities. And the software giant has tens of billions in cash to spend.

Microsoft has been fighting to gain a bigger piece of the smart phone market. Its Windows Phone operating system controls only 1.6 percent of the worldwide market.

Google deal may shake up smart phone market 08/17/11 [Last modified: Wednesday, August 17, 2011 11:05pm]
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