Could Google sell Motorola Mobility’s set-top box business?

The future of the set-top box business that Google is obtaining as part of its US$12.5bn acquisition of Motorola Mobility is under the spotlight, as industry rumours suggest it could be on the block.
According to a report by the New York Post tabloid…

The future of the set-top box business that Google is obtaining as part of its US$12.5bn acquisition of Motorola Mobility is under the spotlight, as industry rumours suggest it could be on the block.

According to a report by the New York Post tabloid newspaper, Google has hired Barclays Capital and Qatalyst Partners to consider a sale. This is in spite of Google CEO Larry Page insisting last August that the set-top box business would play a crucial role in the group’s plan to revolutionise the living room.

Separate industry rumours point to Google having previously sought to acquire Motorola Mobility without the set-top box unit but that this was refused with activist investor Carl Icahn, who recently sold down his stake in the Motorola group, a key driver in a full sale of the business.

Apart from designing and building set top boxes, Motorola Mobility provides networking and wireless infrastructure equipment, including WiMAX technology.

A Google spokesperson declined to comment on the speculation.

Citing sources, the New York Post report also claimed that Google wasn’t the only group looking to divest such assets, with Cisco, Pace and Technicolor also looking to test the markets by putting their businesses on the block. Undisclosed private equity firms are reportedly keen to get involved.

The report claimed increasing pressure is being placed on the traditional set top box model with the rise of increasingly sophisticated software and devices that are able to integrate the TV with the internet. One such operating software is GoogleTV, which the search giant launched last year.

Consumer Electronics Research Group analyst Stephen Froehlich said it would make sense for Google to spin-off the set-top box business in order to preserve the trust of the Motorola’s customers that will be migrating along with it. Motorola Mobility holds a number of key relationships with US cablecos, such as Comcast, and there are concerns that Google’s push in content and television could lead to a conflict of interest if it puts these ahead of the set top box business.

In any case, it is understood that no firm plans will be made until Google and Motorola receive full clearance for their Motorola Mobility deal.

The acquisition has already received the green-light from regulators in Europe and the US, but it is still under investigation in China. Chinese authorities are thought to have until 20 March to decide whether to approve the acquisition or engage a third phase of their review.

Motorola’s set top box business was reportedly last shopped to potential buyers in late 2009, when it was valued at around US$4.5bn.

JPMorgan and Goldman Sachs were reported to have been hired back then in an unsuccessful attempt to find buyers, and private equity firms TPG and Silver Lake were seen as potentially interested, with Chinese vendor Huawei lined up as a likely strategic bidder.