Re: arbitrage on mmi deal
Value Hiker
4/30/2012 8:54:05 PM
Remember Google will take away MMI's patents. Google must sell MMI to someone who focuses on the hardware design & manufacturing business, not someone who want vertical integration like Samsung or LG. I think Huawei is the best match so far.
Re: arbitrage on mmi deal
mInvestor
4/30/2012 8:34:14 PM
Value Hiker,
Good analysis, that's pretty close to what I thought. I don't see Google becomes a hardware company. But the potential buyers could be Huawei or HTC? That will be interesting.
arbitrage on mmi deal
Value Hiker
4/30/2012 12:42:40 PM
The MMI stock drops to $37 last week, and I think it is the best arbitrage opportunity of the year. If Google closes the deal in first half of the year as promised, the real return = 3/40 *(12/3) = 30%.
Ok, some investors will ask what about the downside: the merger doesn't go thorugh.
Can Google afford to drop the deal? This is the same question as: Can Google afford to lose Android? Google has only about a hundred home-brew patents to protect its No.1 Mobile platform. Without MMI's patent, Google & its hardware vendors will be an easy target for vultures like Apple, Microsoft, Oracle, etc. MMI's patents turn Google from a prey to a predator.
MMI has not debt with 3.3B net cash. Google has a penalty of 2.5B if it walks away from the deal. Maybe $5.8B dollars is not big deal for Google, but it is enough buffer for any kind of short term diaster.
As TelecomFreq points out, the Motorola set-top box is a hidden gem of the deal. Cisco paid $6.9B for Scientific Atlanta in 2006 and $5B for NSD this year, just to beef up its settop box business. Guess who is the No. 1 in set top box? It is MMI, not Cisco.
Google acquired MMI for Patent portfolio, nothing more, nothing less. After ripping off the patent portfolio, Google will either spin off the MMI or sell MMI to some other hardware vendors, like Huawei, or HTC. I doubt Google has the guts to digest the MMI's hardware business, even it can be a very profitable business under right leadership.
@minvestor,
They did not pay 12.5 billion for the STB buisness, they put the money up for the 17K patents and the mobile product line of Moto, the STB was something that just happened to fall under Moto Mobility and was part of the deal.
Re: Wait and see
mInvestor
4/30/2012 12:24:02 PM
@TelecomFreq,
You mentioned "This deal also gives Google control over Motos set-top box buisness, I was hopeful for a Google TV intergrated STB, but I think it is far more likely that Google will be selling off the STB side of the business".
Google TV might be a brilliant idea, but paying 12.5 billion for a possiblility on an intergrated STB seems too much. What's so special on Motos STB?
I dont think they should just hand it over. but I think there is value in letting people access your content via a platform like GoogleTV or Roku or Boxee. Much in the same way I see there being value for MSOs intergrating these featuers into their STBs. All the companies make some money, and the consumers of the media get more content. I think the big problem would come from figuring out who gets what piece of the pie.
I know that Boxee has also been shoping around to try and find a STB partner, but I think they would have to get out of hardware sales first for a major player like Moto or Cisco/SA to even consider it.
"Things like Netflix have become far less of a threat to the cable model then just a few years ago"
Right, that's kind of what I'm saying. The competitive advantage is not in the technology, it's in the content. That's why I think the media companies are wising up and they're not just going to hand their content over to Google (the Internet).
Scott,
I think one of the key features here is aggragating all that content to a single device. if GoogleTV were to have used the Moto DOCSIS STB for their new platform it would put them in the cable customers home. so now the same DVR you use could be used not only to access the high quality content you desire but also other web content that might not be avlaible on a device such as the Xbox or PS3 or Wii.
Google has also begun to attract bigger content producers to develop new content on YouTube, though its pretty limited right now, they have laid out a map for launch dates for this year. If at the end of the day it gives you access to more content on a signle device I think that is a good thing.
Things like Netflix have become far less of a threat to the cable model then just a few years ago. 2 years ago Netflix was offering more movies then anything, now the majority of their content is TV shows, an not much of what they offer overlaps with cable providers current VOD offerings, I think Netflix is positioned more as a suplement then a threat at this point. I might very well be a good time for a platform like GoogleTV to put them in bed together...
Yes I understand they want ad revenue and that is part of the problem -- I think the broadcast TV understands they don't want to be shanghai'd the way Google took down newspapers and Apple took down the music industry.
Here's the thing about TVs and content -- I like high-quality produced content. I like my DirectTV DVR. I can watch whatever I want by programming it. That in itself takes away a lot of the advantages of the Google Internet model. Just give me a slightly better DVR box with lower latency and access to a larger film library and I'm happy.
Also I can already get Netflix and lots of streamed content from my Xbox -- so I'm trying to figure out what GoogleTV has that I don't have already have through that combination.
Any thoughts?
GoogleTV is a black hole for money right now, But I think if they were able to get it intergrated into a main stream STB platform it would take off. Though I think a lot of the revenue from it would be generated via advertising and search.
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