The Chinese government
has finally approved the deal
for Google (
GOOG
,
quote
) to acquire Motorola Mobility (
MMI
,
quote
), with a few stipulations. The question now for investors is: will
these requirements imposed by the Chinese have a material effect on
GOOG's stock price?
[caption id="attachment_60987" align="alignright" width="300"
caption="Android at Google HQ"]
[/caption]
First, let's clarify why the Chinese government was involved in
the first place.
According to Chinese law
, all companies operating in China with more than 10 billion RMB
($1.58 billion) in combined global revenue and 400 million RMB ($63
million) in revenue derived from China must seek regulatory
approval from the Anti-Monopoly Bureau before any merger.
Given the size and seemingly exponential growth rate of the
smartphone market in China, the importance of mobile growth for
GOOG going forward, and the problems that the company has had in
the country, it makes sense for the company to not fall foul of
Chinese anti-trust regulations.
In terms of the Chinese government stipulations, at least from
an initial analysis, these rules seems unlikely to alter the
fundamental mobile story for GOOG in China. Chinese regulatory
bodies decreed that GOOG must keep Android both free and open for
the next five years.
This move is thought to "be designed to keep Google from denying
Motorola's handset competitors access to the mobile operating
system, or from
giving Motorola an advantage of some sort
-- such as integration between its handsets and Android that's
tighter than connections between rival phones and the OS,"
according to tech blog CNET.
These measures should come as something of a relief to investors
in companies like HTC, ZTE , and Samsung that all use the Android
platform. As a result of the Chinese government's requirements,
these companies will not be at a significant disadvantage against
MMI's phones in terms of Android offerings.
For GOOG and MMI investors, the news that regulators have
approved the Google Motorola merger should be welcomed, as the two
companies can officially begin preparing next steps. However, the
news in and of itself is no reason to go long or short these
stocks.
