Google Wets Its Pants In China. Chinese Puzzle - Act Global or Look Backward $GOOG $MMI

Drawing of an early Chinese soldier lighting a rocket (Photo credit: Wikipedia)

Google (Nasdaq:GOOG) is trying to buy Motorola Mobility Holdings (NYSE:MMI) primarily to scoop up a huge treasure trove of patents and intellectual property. Anti-trust regulators around the world have in turn signed off on the deal. Except for the Chinese. China the worlds second largest economy seems to be officially sitting on its hands. They are holding up the deal. Google’s track record in China is poor. Let me rephrase that. Google’s track record of governmental affairs in China is poor. The whole world knows it.

The past cannot be undone. When the decision to buy Motorola Mobility was made Google’s board probably did not say “What about China”. Today its “What about China” Its not an accident that China waited until the end. This may be Google’s moment to fix things in China and develop access to the huge market. Certainly there are back room conversations. Chinese sensibility needs to save face and appear to extract something from Google. China also should understand that if they block the deal they will appear to be backward and not modern thereby losing more and bigger face.

Google will be taken out back to the Chinese wood shed and dealt with. Google is still immature globally and is probably wetting its pants in anticipation. If you are truly in the business of maximizing shareholder wealth my advice to Sergey Brin and Larry Page is cut a deal. Get into the China game. The market is too large to be ignored. You cannot have geo-political gaps in your global coverage. Hire Henry Kissinger if you need to. As a matter of fact why haven’t you done so already.

China needs something also. If they block the deal when the rest of the world has given it the imprimatur stamp they look foolishly backward. They run the danger of incurring an international backlash for a parochial approach. Not a preferred option for the Chinese. So Google make the grand gesture. The Chinese market is too large to ignore. You need to drive EPS. Your competitors have access and can use China as leverage against you. Time is money. If you make the Chinese blink first to save face you just build up a huge tab.

George Gutowski writes from a caveat emptor perspective.

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