Breaking News: Google Buying Motorola For $12.5 Billion [Updated]

Google Acquires Motorola

Google has just dropped a bombshell on the mobile phone industry. It has announced that it is acquiring Motorola Mobility for $12.5 billion in cash, a 61% premium.

In a post titled ‘Supercharging Android: Google to Acquire Motorola Mobility‘, Google’s co-founder and CEO Larry Page has explained why it has decided to buy Motorola.

Larry Page writes:

In 2008, Motorola bet big on Android as the sole operating system across all of its smartphone devices. It was a smart bet and we’re thrilled at the success they’ve achieved so far. We believe that their mobile business is on an upward trajectory and poised for explosive growth. 

Motorola is also a market leader in the home devices and video solutions business. With the transition to Internet Protocol, we are excited to work together with Motorola and the industry to support our partners and cooperate with them to accelerate innovation in this space. 

Motorola’s total commitment to Android in mobile devices is one of many reasons that there is a natural fit between our two companies. Together, we will create amazing user experiences that supercharge the entire Android ecosystem for the benefit of consumers, partners and developers everywhere.

Page has also clarified that Android will remain an open platform with Motorola as one of the licensee. So other Android device manufacturers don’t need to worry about it immediately, though it should be a concern in the long term:

This acquisition will not change our commitment to run Android as an open platform. Motorola will remain a licensee of Android and Android will remain open. We will run Motorola as a separate business. Many hardware partners have contributed to Android’s success and we look forward to continuing to work with all of them to deliver outstanding user experiences.

Page has also highlighted that one of the main reasons for buying Motorola is to strengthen its patent portfolio, so that it can protect Android from patent wars. You may remember that Google had recently claimed that Apple, Microsoft and other competitors were waging a patent war against Android. Apple has also recently sued Motorola for copying iPad.

We recently explained how companies including Microsoft and Apple are banding together in anti-competitive patent attacks on Android. 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.

By buying Motorola, Google also seems to endorse Apple’s strategy of building the entire product, which includes hardware and software.

It will be interesting to see how the Google will compete with Apple’s iOS devices with the acquisition of Motorola. We believe competition is always good from a customer point of view and its important that Apple is challenged by stronger rivals like Google, which we feel will only get stronger with the Motorola acquisition.

Update 1:

To get an idea of what the Motorola acquisition means to Google’s patent portfolio, here’s a snippet from Motorola Mobility’s website, where it talks about the number of patents it owns related to various industry standards:

As of January 2011, Motorola will own approximately 24,500 patents and patent applications, worldwide. These include substantially all of the patents unique to Mobile Devices and Home businesses. Our patent portfolio generally relates to wireless, audio, video, security, user interface and product design, along with applications and services related to our products. Our Mobile Devices business segment will have approximately 14,600 granted patents and 6,700 pending patent applications, worldwide. Our patent portfolio includes numerous patents related to various industry standards, including 2G, 3G, 4G, H.264, MPEG-4, 802.11, open mobile alliance (OMA) and near field communications (NFC). The Home business segment will have approximately 1,900 granted patents and 1,300 pending patent applications, worldwide. Further, we believe our portfolio of patents in 4G will position our customers well in the upcoming technology transition from 2G to 3G. 

Update 2:

Wall Street doesn’t seem to like the news, Google’s stock is down 16.42 (-2.91%) at the time of writing this update in pre-market trading and as expected Motorola Mobility is up a whopping $14.28 (58.36%) as Google is buying it for a huge premium. It will be interesting to see at what price Google stock closes today, as by then people should get some time to digest the news. Any guesses?

What do you think about Google’s acquisition of Motorola? Please share your views in the comments section below.

[via Official Google blog]