If you’ve been paying attention to the cellular phone industry lately you’ve probably come across the big news of the week – Google has bought Motorola Mobility for the price of $12.5 Billion.

The good news, for those who remain Android fans, is that Google promises this is not a prelude to stripping away the open license on the Android OS.

Notwithstanding this piece of PR spin, there are signs that this acquisition may have backfired on Google, with S&P (yes, the same guys from the US credit rating downgrade) calling for a sell on Google shares at a price considerably lower than the current trading value.

The question becomes: why has this acquisition become a source of controversy?

A Change in Direction

One of the reasons for concern is simple: Google hasn’t done something like this before. The strategy from google, since the 2007 inception of the Android OS, has always been to concentrate on software, to keep it under some form of an open license, and to let cellular developers buy in with the hardware.

Most analysts think it all comes down to patents. There has been fierce legal competition over patents in recent years. We’ve seen it crop up with the battle in Australia and the EU over the Samsung Galaxy Tab, but if you thought the battles between Samsung and Apple were heated, they’re nothing compared to the legal battles being waged with Google over patents.

Motorola Mobility owns quite a few valuable patents, and so Google’s purchase of Motorola Mobility gives them leverage in the ongoing smartphone patent wars.

Because of this, Google’s move has been characterized as defensive, and investors get nervous when big companies make big defensive plays.

No Longer a Level Playing Field

Some commentators have also expressed concern over the move because of how it impacts major manufacturers such as Samsung and HTC. Previously, all competitors in the Android field were on an even footing. Google provided the OS and they did the rest.

Now, Google owns a major manufacturer of handsets, through Motorola Mobility. The fear is that, even if the Android OS remains on an open license, this will considerably reshape the landscape for Android manufacturers, giving Motorola Mobility an edge other companies don’t have.

These fears have, in turn, led to fears that there will be a slow-down in innovation and the development of new Android units.

The S&P Downgrade

Based on these concerns, and on the fear that the acquisition of Motorola Mobility patents won’t be sufficient to calm Google’s legal woes, the recently-nervous analysts at S&P decided to downgrade Google stocks, lowering the price target from $700 to $500 and recommending that people sell.  Despite the $200 price target cut, Google shares fell $19.57, a 3.5% loss.

It isn’t great news for Google, but it’s not the end of the world either.

What Does it Mean for Canadians?

Largely this isn’t really knowable yet. The stock market losses posted by Google aren’t the end of the world for the search and software behemoth. If some of the secondary concerns prove to be false, or exaggerated, there may very well prove to be negligible impact on the Canadian cellular market.

Frankly, the recent global financial fears, largely stemming from ongoing financial problems in the EU, and that other S&P downgrade, have caused stocks to fall in general over the last few weeks. Considering that even Apple stocks have fallen (though less sharply) over the last week, I don’t see the stock market activity as really being an issue.

As far as concerns about innovation and development of new devices goes, two factors have to be considered before taking that too seriously:

1) the best Android devices were already being made by Samsung and then by Motorola anyway. The new generation super-phones are almost all Android because Apple’s closed-shop approach has significantly slowed down the advance in iOS device technical specs. Even if the rate of innovation slowed slightly, it would still probably outstrip the main competition.

2) Research cycles are not overnight things. Samsung, HTC and Motorola have already invested in the R&D for the handsets that will be coming out well into 2012. Many of these, though not launched, may very well be in production. By the time this move by Google is actually positioned to have an impact on innovation, we could very well see a market completely changed by whatever research is already coming down the line.

At worst, we’ll see a modest increase in the price of Android handsets. However, with the help of an expert, the price of even the most elite of handsets can be mitigated and offset.

Google will continue to face challenges, as long as Android continues to gain market share at the expense of RIM, Symbian and even iOS, but I wouldn’t count Google out of the mobile market over a single defensive move just yet.