Google to buy Motorola Mobility for $12.5B

Google to buy Motorola Mobility for $12.5B

Dylan McGrath  8/15/2011 12:37 PM EDT–12-5B?cid=NL_EETimesDaily

Web search giant Google signed a definitive agreement to acquire handset vendor Motorola Mobility for about $12.5 billion in cash. SAN FRANCISCO—In its boldest and most ambitious step yet into the mobile handset space, Web search giant Google Inc. said Monday (Aug. 15) it signed a definitive agreement to acquire handset vendor Motorola Mobility Holdings Inc. for about $12.5 billion.
Google (Mountain View, Calif.) said it would pay $40 per share for Motorola Mobility, a premium of 63 percent over the handset makers Aug. 12 closing price of $24.47. Motorola Mobility’s stock surged up 56 percent in early afternoon trading Monday on the news.
Google said the acquisition of Motorola Mobility, a member of the Android Open Handset Alliance, would enable Google to “supercharge” the Android ecosystem and enhance competition in mobile computing. Motorola Mobility will remain a licensee of Android and Android will remain open, Google said. Google will run Motorola Mobility as a separate business, Google said.
“Motorola Mobility’s total commitment to Android has created a natural fit for our two companies,” said Larry Page, Google co-founder and CEO, in a statement. “Together, we will create amazing user experiences that supercharge the entire Android ecosystem for the benefit of consumers, partners and developers. I look forward to welcoming Motorolans to our family of Googlers.”
In a blog posting, Page said the acquisition would strengthen Google’s patent portfolio, enabling the firm to better protect Android from “anti-competitive threats from Microsoft, Apple and other companies.” Page noted that Microsoft and Apple last month led a consortium of companies that banded together to buy a load of patents from Nortel Networks Corp. for $4.5 billion. Google claims this acquisition is part of anti-competitive behavior meant to squash the growth of the Android operating system, which is now the leading smartphone OS, found in 48 percent of smartphones in the second quarter, according to market research firm Canalys Ltd.
Google initially bit $900 million for the Nortel patents. Some analysts have said Google is in desperate need of patents. There are reportedly more than 45 patent infringement lawsuits against Android and makers of Android devices.
Motorola Mobility currently holds 24,500 approved and pending patents around the world. These include  14,600 approved and 6,700 pending patents held by its Mobile Devices unit covering key industry wireless standards including 4G and near-field communications. Together, this treasure trove could aid Google in defending itself in ongoing intellectual property fights with rival mobile device developers.
“From an intellectual property  standpoint, the acquisition bolsters Google’s negotiating position with Apple, in the event that Apple goes after Android-based products the same way it did with Samsung in Europe,” said Francis Sideco, principal analyst for wireless communications at market research firm HIS iSuppli. “If nothing else, Google will be able to assert Motorola’s IP for the 3GPP and 3GPP2 cellphone specifications, which are used in both the iPhone and iPad.”
Apple has filed patent infringement lawsuits against Samsung, claiming that Samsung’s Galaxy media tablets and smartphones copy the design of Apple products. Last week, a European Union judge granted an Apple request to temporarily halt the sale of Samsung’s Galaxy Tab 10.1 in most of Europe.
Possible bidding war?
Paul McWilliams, editor of technology investment newsletter Next Inning Technology Research, said that another company—perhaps Microsoft—might enter the fray and top Google’s bid for Motorola Mobility.
“I think there is a reasonable enough chance we’ll see someone else come in with a counteroffer if for no other reason but to force Google to dig a little deeper,” McWilliams wrote in a report to subscribers Monday. “As I see it, Google can clearly leverage Motorola Mobility from many perspectives, and the armor of Motorola Mobility’s patent portfolio is nearly a must-have.”
McWilliams said Google’s move might also spur Microsoft to acquire Nokia Corp., the world’s largest handset maker.
Billionaire financier Carl Ichan, a large Motorola shareholder who last month publicly urged Motorola Mobility to explore options for selling its patent portfolio in the wake of the Nortel patent auction, issued a statement Monday applauding the Google deal.
“This is a great outcome for all shareholders of Motorola Mobility, especially in light of today’s markets,” Icahn said.
In a separate statement, Sanjay Jha, CEO of Motorola Mobility, said, “This transaction offers significant value for Motorola Mobility’s stockholders and provides compelling new opportunities for our employees, customers, and partners around the world.”
Google and Motorola Mobility’s’ boards have already unanimously approved the transaction, which is subject to customary closing conditions, including the receipt of regulatory approvals in the U.S., the European Union and other jurisdictions, and the approval of Motorola Mobility’s stockholders, Google said. The transaction is expected to close by the end of 2011 or early 2012, Google said.
– George Leopold and Nic Mokhoff contributed to this report from Washington D.C. and Manhassett, N.Y., respectively.