I checked in on the headlines this morning and got a big shock, one I didn’t really see coming. Google has acquired Motorola for $12.5B and gaining another 20K employees in the process.

Some pretty interesting thoughts already emerging, even though as John Lilly says, the structure of the deal and what will happen with the business going forward is by no means certain.

The main ones I’m seeing are:

1. This is all about getting an integrated hardware/software solution to compete with the much superior iPhone experience.
2. This is all about getting the patent portfolio of Motorola so Google isn’t standing there with a knife – or a ukulele playing kumbaya – in the patent gun fight.

The Integrated Stack Hypothesis

I don’t really buy the first argument. Samsung, HTC and Motorola are all creating great handsets and fantastic user experiences. The Samsung Galaxy II is in my experience a much better user experience than the iPhone. Sure, then there’ll be the iPhone 5 and the competition will continue, but this mindset that iPhone is so clearly superior is a very Silicon Valley thing; Android is already out-selling the iPhone, and Apple continue to limit their innovations to their own platform (most recent examples being their messenger product, and before that, Facetime). We’ve seen this story before.

While Motorola is the only one of these three big companies to make the Android-only bet, and thus is most ready for acquisition in that respect, and Samsung is too big, diversified and successful to be a target either – do you know they make earthmoving equipment? – the reality is that Google doesn’t need to develop the “integrated hardware and software stack” to make Android a success – Android is already a success, and that is why it is being hit so hard in IP fights.

The IP Hypothesis

The second reason that is certainly true and real – Larry admitted it in black and white on their blog post announcing the deal – is the IP protection consideration. To give themselves a defensive warchest – which they can cross-licence to HTC and Samsung and the rest, thereby giving them a bigger shield than they’ve enjoyed thus far – Google have just gone out and bought a hardware manufacturing and distribution business, acquired the obligations that come with having another 20,000 staff, and god-knows-what-else-is-hiding-in-an-80+-year-old-company. They surely haven’t had time to do due dilligence: no-one saw this coming. They’re making a pretty big bet, and all that just a month after they lost at Nortel bid in what MG described as a replay of the staking game from Casino Royale.

Now, not all patent portfolios are created equal, but Google recently passed up the opportunity to acquire all of the Nortel Patents for $4.5B. That is almost a third as much as they’ve just spent on buying Motorola. So, either there’s something amazing in the operating Motorola business compared to the defunct Nortel business that justifies spending an extra $8B when Google said the reason they backed out of the Nortel auction was because the price was too steep, or someone from Google on the Nortel team doesn’t get their Christmas bonus this year.

The Market Hypothesis

There’s a third, and I think really important reason, why doing this deal might make sense in the long run for Google, and I haven’t seen it spoken about yet in this debate. A year ago MG @ Techcrunch was railing about how the Carriers here in the US were using the ‘open’ nature of Android to continue their vice-like grip of the user experience for their customers. Buy a Sprint phone, and you get it jammed full of crapware like bogan Nascar apps and the like. Same with Verizon, and with the Galaxy II in Australia, you’d get the bullshit Optus apps and Samsung’s rubbish app store just confusing users.

There is another potential in the mix here. Apparently, when Google were first thinking about how to take Android to market, they wanted to have a $100 phone which wasn’t tied to a carrier. The carriers apparently vetoed this scenario, and Google realized without a cell network of its own the idea was DOA.

That was before the success of Android, but they’d still really struggle to do it without a serious hardware capability; a hardware manufacturer that tried to break the cartel would probably be blacklisted by the cartel, and they wouldn’t be able to handle the heat.

Google, on the other hand, can. Now that Android is entrenched, they could try and disrupt this market. They could provide a phone, an O/S and give users freedom and portability. They could go down market into the land still owned by feature phone manufacturers like Nokia and go after the long tail of users who are still more likely to click on ads (remember, that’s how they make money). And while the carriers would absolutely be pissed off by this, Android has grown large and entrenched enough now to get away with it.

Will they do it? I don’t know. In the short term it might piss off HTC and Samsung for Google to use Motorola in this way, as it would be so disruptive and would require the phone to be sold as a loss leader. But, if this is a section of the market that HTC and Samsung weren’t able to access anyway, and if is allowed people to buy the best phone and take it where they wanted, then perhaps it would be a win in the medium term for everyone. Except for the US carriers. And that would be a great result for the rest of us.