Software Giant Google to acquire Motorola Mobility for $12.5b

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Google Inc. announced Monday that it would acquire Motorola’s phone business, Motorola Mobility Holdings, for $12.5b, in a move that would launch the Android-platform maker into a head-on competition with Apple.

The acquisition is Google’s biggest ever, at an offer price of $40 per share, 63% above the closing price of Motorola Mobility shares as on Friday last. Larry Page, who recently took over as Google’s CEO said the deal would bolster its Android operating system and increase the number of patents owned by Google. The software-giant took a backseat in last month’s bidding for patents from the bankrupt telecommunications company, Nortel Networks, where Microsoft and Apple, among other technology companies, purchased around 6000 patents. Google’s acquisition of Motorola now puts it ahead of the race, with more than 17000 patents, to protect it from anti-competitive threats against its Android software.

Android, developed as an open source platform, has gained popularity as the operating system of choice among cell phone manufacturers vying to compete with Apple’s iPhone. Aside from the competitive edge however, Android partners have found themselves mired in conflict with Apple and Microsoft, over the use of the Android OS. Therefore, protecting Android from anti-competitive threats would also benefit Android partners such as HTC Corp., which is currently engaged in a lawsuit with Apple.

Google’s acquisition of Motorola Mobility Holdings now puts it in the hardware manufacturing business, which has its pros and cons. On the one hand, Google will gain absolute control over both hardware and software aspects of Motorola smartphones, thus opening up new possibilities for advancements and built-in features; while on the other hand, competing against other hardware manufacturers, who are also licensed Android-users. Addressing this issue in a blog post, Mr. Page said, “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.”

Motorola Mobility Holdings was formed in January this year, when Motorola Inc. branched out into two separate companies: Motorola Mobility Holdings and Motorola Solutions Inc. Following massive losses to the tune of $4.3 bln from 2007-2009, Motorola Mobility CEO Sanjay Jha revamped the cell phone company by adopting Android as the sole operating system across all of its’ smartphone devices. Carl Icahn, the second biggest shareholder in Motorola Inc., hails the present acquisition as a “good deal for both sides”.

The deal awaits shareholder approval and a review by the Justice Department’s anti-trust division.

While it remains to be seen how Android partners would respond to the buy-out, consumers can rest assured of getting more choices and improved user experiences.

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