Google's Motorola bet to reshape Asian phone makers (Reuters)

SEOUL/TAIPEI (Reuters) – Asian handset makers using Google Inc's Android operating system might turn to rival platforms such as Microsoft Corp's Windows after Google upended the mobile landscape with its $12.5 billion bid for Motorola Mobility Holdings.

Taiwan's HTC and Korea's Samsung Electronics have sold millions of mobile devices running on the free Android system, catapulting Google to the top slot in the booming global mobile software market.

But the acquisition of Motorola could turn Google from a partner to a competitor for more than 30 other Android-handset companies.

"The deal will make most Android players realize how dependent they are on Google and how quickly Google's plans can change their businesses," said Francisco Jeronimo, an analyst at research firm IDC.

Wall Street quickly anointed Microsoft a winner in the deal, with Windows potentially benefiting if the acquisition alienates the other phone makers that rely on Android.

Android held a 43.4 percent share of the smartphone market at the end of the second quarter, ahead of Nokia's 22 percent, according to data from research firm Gartner. Apple ranked third with 18 percent, the data showed.

Nokia earlier this year opted for Microsoft's software, dropping its own software and shunning Android. Its first Windows Phone handsets are due out later this year.

Shares in Nokia, which had fallen around 45 percent since from the start of the year to last Friday due to worries about its declining market share, rose 5.5 percent on Tuesday, extending Monday's 9 percent jump.

Much of that was due to speculation Nokia could become the next buyout target, although analysts were mixed about the possibility of a bid emerging.

Some said the high offer for Motorola made Nokia look cheap by comparison.

But others said that while Nokia could benefit from the deal if it stirs confusion among Google's other handset partners, such a situation could compel a company like Microsoft to shun a buyout of any particular handset maker.

"Eventually, we think that conflicts of interest may force Google to choose between vertical integration and shutting down device production at Motorola Mobility," J.P. Morgan analyst Rod Hall said in a note to clients.

BETS ON MOTOROLA TURNAROUND

Shares in Motorola's Asia's suppliers jumped on the deal.

Foxconn International Holdings Ltd, the world's top contract cellphone maker which counts Motorola as a client, surged as up to 17 percent on prospects of more business.

Shares of Compal Communications Inc and Arima Communications were among a slew of Motorola suppliers that hit the 7-percent daily limit in Taiwan.

"Everybody is betting on a Motorola turnaround. Motorola will get more help from Google to push its Android handsets with the deal," said Yuanta Securities analyst Bonnie Chang in Taipei. "Outsourcing companies such as Foxconn International and Compal Communications will benefit directly the most."

Shares in Samsung, which has businesses from chips to TVs and energy as well as phones, ended 6.1 percent higher. Fellow Korean phone maker LG Electronics edged up 0.3 percent.

HTC closed up 3.1 percent in a Taiwan market down 0.3 percent.

ANDROID UMBRELLA

Some brokers said the Motorola deal could be Google's way to provide support to Android players.

Phone makers and software firms are involved in copy-cat lawsuits in the fierce battle over who owns patents used in mobile devices, with Apple going after Android device makers.

"We suspect that Google will now try to provide an umbrella for the Android community that provides IP protection from key rivals such as Apple and Microsoft. This is broadly how Microsoft protects Windows Phone," Nomura said in a note.

"We do not believe that Google will aim to continue to make handsets long term, but will rather look to spin the business out to an Android partner -- such as Huawei, LG, ZTE, for example."

Globally, HTC has been a standout winner after being the first to roll out an Android-backed smartphone, leaving it most exposed to any shift in the landscape, analysts said.

Nearly all of its smartphones run on Android but it also has a long-standing partnership with Microsoft.

"HTC and Samsung are companies Google can trust but not control to drive market share," Chang said. "If in the long run Google decides HTC and Samsung have very different business roadmaps, it may want to leverage on Motorola to gain market share."

HTC said in May it plans to bring out phones based on Microsoft's new Mango Windows phone software. However on Tuesday, HTC said the Google-Motorola deal would not affect its partnership with Google.

"This is a positive development to the Android ecosystem, which we believe is beneficial to HTC's promotion of Android phones," HTC said in a statement.

(Additional reporting by Faith Hung in Taipei and Lee Chyen Yee in Hong Kong; Writing by Anshuman Daga; Editing by Lincoln Feast and David Cowell)

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China, U.S. play down tensions at Asian security summit (Reuters)

NUSA DUA, Indonesia (Reuters) – The United States and China moved to repair strained ties on Friday, saying tensions over the South China Sea were easing with new conduct guidelines between Beijing and Southeast Asian nations.

Secretary of State Hillary Clinton and Chinese Foreign Minister Yang Jiechi, meeting at Asia's biggest security conference, appeared eager to ensure the dispute over the oil and gas-rich waters did not become another source of friction between the world's largest economy and the second-largest.

"I want to commend China and ASEAN for working so closely together to include implementation guidelines for the declaration of conduct in the South China Sea," Clinton said at the meeting on the Indonesian resort island of Bali.

Clinton will outline the U.S. position in more detail in an address on Saturday, saying Beijing and its Southeast Asian neighbors need to do more to cut tensions, boost communication and work out legal and operational details of their new deal.

But U.S. officials said China was clearly ready to tamp down tensions over the issue.

"China has come to this meeting with a clear determination that they want to ease anxieties," one senior U.S. official told reporters.

China acquiesced to the new guidelines on Thursday after almost a decade of deadlock, in what may have been an attempt to mollify ASEAN enough to take the topic off the table before Clinton's arrival. China, Taiwan, and four ASEAN members -- the Philippines, Malaysia, Brunei and Vietnam -- all claim territory in the South China Sea and Washington has irritated Beijing by declaring it also has a national interest at stake in ensuring freedom of navigation and trade.

China says it has had undisputable sovereignty over the South China Sea since ancient times, and is adamant about not involving other parties to help resolve the matter.

The U.S. official said Clinton's speech on Saturday would address some of these concerns, and advocate for a more straightforward legal process to resolve disputes.

China has accused the United States of triggering tension in the region by holding naval drills, and President Barack Obama's meeting with Tibetan spiritual leader the Dalai Lama last week has added further strains.

Foreign minister Yang, hosting Clinton for bilateral talks on the sidelines of the ASEAN security forum, said the South China Sea guidelines would "go a long way to maintaining peace and stability and good neighborliness in the region."

Diplomats said the guidelines were only a small, but important, step toward resolving one of the region's longest-standing disputes.

"If parties concerned abide by the guidelines, certainly tensions will be reduced," said a senior Asian diplomat.

"We have to engage with China so China takes the right course. China has to understand international rules and the South China Sea dispute is an important test case."

UNDERSTANDING SENSITIVITIES

Yang did not mention Obama's meeting with the Dalai Lama, regarded by Beijing as a violent separatist, but a Chinese spokesman indicated it could come up.

"We believe that it is important to respect the sovereignty and territorial integrity of China, and to respect China's major concerns on the issue of Tibet and some other sensitive issues," spokesman Liu Weimin told reporters.

"I sense the U.S. side understands the sensitivity of these issues and we both agreed to promote further dialogue."

The U.S. official said China was "solemn" in its discussion of the Dalai Lama issue, but held its fire.

"I've been in meetings before where some of the rhetoric can be carried away. It was polite and respectful from both sides," the official said, taking this as a signal from Beijing "to maintain forward momentum" in the relationship.

Yang focused on U.S.-Chinese cooperation on a range of issues including efforts to bring North Korea back into six-party negotiations on its nuclear program.

U.S. officials said Clinton's meeting in Bali with Yang marked the start of several months of high-profile diplomacy in the region that both sides want to succeed.

Both Obama and Chinese President Hu Jintao are due to attend a meeting of the APEC Asia economic forum in Honolulu later this year, and Obama will also attend November's East Asia Summit in Bali for the first time, giving him another chance to touch base with the Chinese leader.

Clinton will fly on Sunday from Bali to Hong Kong -- the first U.S. secretary of state to visit since 1997 when China resumed control of the city from Britain -- and will stop by the southern Chinese city of Shenzhen on Monday for a meeting with Chinese State Councilor Dai Bingguo.

Clinton is due to give a speech in Hong Kong on Monday that will emphasize the U.S. view of economic ties with China, which have been a serious source of tension in the past. (Additional reporting by Raju Gopalakrishnan; Editing by Raju Gopalakrishnan and Sugita Katyal)

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