The deal will give Google its own hardware maker

Web giant Google has agreed to acquire handset vendor Motorola Mobility  for $12.5bn. “The acquisition of Motorola Mobility, a dedicated Android partner, will enable Google to supercharge the Android ecosystem,” Google said.

The transaction is expected to close by the end of this year or early 2012 and will see Google shelling out a premium of 63 per cent to the closing price of Motorola Mobility shares on August 12.

Andy Rubin, senior vice president of Mobile at Google and one of the creators of the Android platform, said that Motorola Mobility will remain a licensee of Android and Android will remain open. Google will run Motorola Mobility as a separate business but will use the acquisition to increase competition in the handset space.

“We expect that this combination will enable us to break new ground for the Android ecosystem. However, our vision for Android is unchanged and Google remains firmly committed to Android as an open platform and a vibrant open source community. We will continue to work with all of our valued Android partners to develop and distribute innovative Android-powered devices,” Rubin said.

No doubt there are also a fair few patents involved in the deal, and the Motorola acquisition will help Google shore up its own portfolio. “We recently explained how companies including Microsoft and Apple are banding together in anti-competitive patent attacks on Android,” said Google CEO Larry Page. “The U.S. Department of Justice had to intervene in the results of one recent patent auction to ‘protect competition and innovation in the open source software community’ and it is currently looking into the results of the Nortel auction. Our acquisition of Motorola will increase competition by strengthening Google’s patent portfolio, which will enable us to better protect Android from anti-competitive threats from Microsoft, Apple and other companies,” he said.

“Having been outbid in the recent sell-off of Nortel’s patent portfolio, Google was clearly willing to look elsewhere to build up its arsenal of IP and in the light of the growing number of IP legal disputes in the smartphone market; this move will put Google in a stronger position competitively,” said Ovum analyst Nick Dillon.

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  • Interesting news. What about the Tax Sharing Agreement with M’s former parent? It has a 2-year restriction on M&A under certain circumstances? Perhaps that is why the deal won’t close until 2012. Otherwise the premium actually looks reasonable given there is $3 billion in cash and the patent portfolio was surely undervalued in the $7.5 billion market cap prior to the deal.

    Reply to Ken Hoyt on Google to buy Motorola handset unit
  • u gotta start to ask yourself if patents are really serving their stated purpose any more in the light of these developments.

    Reply to Feuerschale on Google to buy Motorola handset unit
  • Google would own all of Motorola’s patents, and could license them to (or just share them with) other Android licensees if it wanted to. Motorola invented the cellphone almost 30 years ago, so this is worth a lot.

    Reply to businesstelephone_guy on Google to buy Motorola handset unit
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