Google to Buy Motorola Mobility for $12.5 Billion

[Miguel]

In a bid to strengthen its mobile business, Google announced on Monday that it would acquire Motorola Mobility Holdings, the cellphone business that was split from Motorola, for $40 a share in cash, or $12.5 billion.

The offer — by far Google’s largest ever for an acquisition — is 63 percent above the closing price of Motorola Mobility shares on Friday. Motorola manufactures phones that run on Google’s Android software.

Android has become an increasingly important platform for Google, as global smartphone adoption accelerates. The platform, launched in 2007, is now used in more than 150 million devices, with 39 manufacturers.

The acquisition would turn Google, which makes the Android mobile operating system, into a full-fledged cellphone manufacturer, in direct competition with Apple.

“This is an emphatic exclamation point that Google is a mobile company,” said Ben Schachter, an analyst with Macquarie Capital. “This is clearly a defensive deal, they were backed in a corner and they had to protect the Android platform.”

The deal answers a big question about Google’s next strategic step in wireless. Google has been battling with Apple and Microsoft over patents.

Last month, Apple and Microsoft led a consortium of technology companies in a $4.5 billion purchase of roughly 6,000 patents from Nortel Networks, the Canadian telecommunications maker that filed for bankruptcy in 2008. Google, which lost out in the bidding, criticized the deal as an anticompetitive strategy. Several weeks later, Google acquired more than 1,000 patents from I.B.M.

Motorola holds more than 17,000 patents.

...A Motorola tie-up may also irk other phone manufacturers, like Samsung and HTC, which will now be competing directly with Google.

“Can they convince their competitors that Motorola will truly operate as a standalone business?” Mr. Schachter said.

And while Google has made dozens of acquisitions in recent years, most of them have been for less than $1 billion — despite a current war chest of some $40 billion in cash. On the company’s official blog, Mr. Page said Google was purchasing the handset maker to bolster its Android mobile operating system and increase the number of patents it owned.

Android accounted for 43.4 percent of smartphone sales in the second quarter, according to Gartner Research, a major increase from the year ago period, when it made up about 17 percent of sales.

“Our acquisition of Motorola will increase competition by strengthening Google’s patent portfolio, which will enable us to better protect Android from anticompetitive threats from Microsoft, Apple and other companies,” Mr. Page said.

http://dealbook.nytimes.com/2011/08/15/g...-mobility/