Google buys Motorola, S&P doesn't have a leg to stand on, and a surprisingly good GOP debate gets lost like dust in the wind.
Google Buys Motorola
What a way to start a Monday morning...Google blew up the social networks, media outlets, and my inboxes by announcing their acquisition of Motorola Mobility. This is an incredible development in the smart phone arms race as many people have speculated about the true motivation behind Google's move. The two main theories are that Google is acquiring tools to build hardware that meets their software specs and for the treasure trove of 17,000 patents which will help re-balance the scales of the smart phone landscape. Google found itself in a defensive position (or did they...) when Apple, Microsoft, RIM, Sony, Ericsson, and EMC agreed to purchase the Nortel patents in July. Holding these patents could slow the growth of Droid by allowing the gang of software/hardware manufacturers to compete with Google in the court room to improve their chances in the marketplace. Tom Evslin posted on a third hypothesis where he believes Google is looking for leverage over Verizon and AT&T/T-mobile but I doubt this was their primary motivation.
This is a Win-Win for Google and their stock holders as it positions them to compete more directly with Apple. It allows Google to control almost the entire user experience by vertically designing the product (See Larry Page's own post). The only aspect they wont control is the service provider that gets to squeeze every penny out of your contract while offering horrible customer service. Don't be surprised if Google makes a push into the service game and be ready for an eventual roll out of their high-speed wireless network. I also wouldn't be surprised if this deal gets slammed by the FTC. If the FTC doesn't act, only good things can come for Google and their stock holders by making this acquisition.
S&P Downgrade
The story that has dominated the news (probably should have been first in this post) is the S&P downgrade of US debt from AAA to AA+. While analysts were mixed on the repercussions of a US downgrade the markets have shown a clear lack of cohesion as last week saw the Dow trade at swings of 700 points while US Treasuries yields continued their decline. Jon Stewart put it well when saying, "You burn our house down and then you have the balls to come over and go, hey is your basement still standing?" Do you mind if I put my money there for a little bit." If anything, this downgrade only demonstrates the inability of any rating agency to make an objective decision on the creditworthiness of an entity. This isn't an attack on the intelligence of S&P employees but simply the opinion that ratings are simply that, opinions. S&P will never beat the market at predicting the potential default of any entity and the surge in Treasuries demonstrates that point. It also demonstrates that the markets are acting irrationally.
S&P also downgraded Google after the Motorola deal was announced saying, "the planned purchase of the losing Motorola Mobility would negatively impact Google’s growth, margins and balance sheet." The analyst also claimed that the 17,000 patents will not help Google in their fight over Android. Apparently this analyst believes he knows more about the value of 17,000 patents than the company that would have done extensive research to understand what they were buying before making such an All-In bid. I'm guessing he read two of the applications, three tops. Watch Google to cut jobs, shed assets, and incorporate the Google model to turn out new hardware that revolutionizes the phone and television industries while improving their bottom line. Or they'll store the patents and burn the rest.
Republican Debate
I didn't catch all of the Iowa Republican debate but the clips I managed to catch were well worth it. Rep. Bachmann clearly performed well in Iowa as her strong performance led to a slim victory in Saturdays straw poll. She faced easily one of the most difficult questions of the night when asked to defend/explain/clarify her statement that she submitted to her husband's will and became a tax lawyer:
Mitt Romney stood by his unique proposal to privatize unemployment benefits:
While Ron Paul proved his antiwar credentials:
Unfortunately for Rep. Paul the media has failed to recognize him as a legitimate candidate and only Jon Stewart can adequately demonstrate their bias:
Poor Ron Paul...
Disclosure: I don't have a stake in Google, Treasuries, or the GOP.
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