Google to buy Motorola Mobility for $12.5b

Google shook up the mobile phone industry Monday with the announcement it is buying US handset maker Motorola Mobility for $12.5 billion in cash in a bid to extend the reach of its Android platform.
The surprise move gives Google a strong patent portfolio to defend Android against attacks from smartphone rivals such as iPhone maker Apple and turns a company known for its software into a hardware manufacturer.
Analysts said the acquisition also has major implications for handset makers such as Taiwan's HTC, South Korea's Samsung and others who are using Android to power their mobile devices.
Google and Motorola Mobility said they have entered into an agreement under which the Internet titan will buy Motorola Mobility for $40.00 per share, a 63 percent premium over the closing price of Motorola Mobility shares on Friday.
They said the boards of directors of both companies have unanimously approved the deal, Google's largest acquisition ever.
Under the agreement, Motorola Mobility will remain an Android licensee and Google will run the unit as a separate business.
"Motorola Mobility's total commitment to Android has created a natural fit for our two companies," Google chief executive Larry Page said in a statement. "Together, we will create amazing user experiences that supercharge the entire Android ecosystem for the benefit of consumers, partners and developers."
Page said the deal will help protect Android against patent lawsuits targeting the open-source mobile operating system which Google provides to smartphone and tablet computer makers for free.
"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.
Google earlier this month accused Apple, Oracle, Microsoft and other firms of using "bogus patents" to wage a campaign against Android.
Google bid earlier this year for 6,000 patents held by bankrupt Canadian firm Nortel but lost out to a consortium made up of Apple, EMC, Ericsson, Microsoft, Blackberry maker Research in Motion and Japan's Sony.
In a conference call with financial analysts, Motorola Mobility chief executive Sanjay Jha said the US maker of smartphones and tablet computers has over 17,000 issued patents and another 7,500 pending.
Jha said the Google acquisition will bring "significant value" to Motorola Mobility's shareholders, along with new opportunities.
"We have shared a productive partnership with Google to advance the Android platform, and now through this combination we will be able to do even more to innovate and deliver outstanding mobility solutions across our mobile devices and home businesses," Jha said.
Google's chief legal officer David Drummond said the acquisition will require regulatory approvals in the United States, the European Union and elsewhere but he expects it to receive the green light.
"We believe very strongly that this is a pro-competition transaction," Drummond said.
The purchase will also require the approval of Motorola Mobility shareholders.
Andy Rubin, senior vice president of mobile at Google, said the Mountain View, California, company will continue to provide Android to other handset makers.
"It's business as usual for Android," Rubin said. "I see it as basically protecting the ecosystem and extending it as well."
Google CEO Page also stressed to analysts there would be "no change in how we're running Android." "Android is still open," he said. "The partners are very excited about this."
Google provided quotes from several Android partners praising the deal.
"We welcome today's news, which demonstrates Google's deep commitment to defending Android, its partners, and the ecosystem," J.K. Shin, president of Samsung's Mobile Communications Division, was quoted as saying.
Gartner research director Michael Gartenberg said the patent protection would be welcome news for Google's Android partners but "that's probably the only good thing that comes out of this for third parties."
"All of a sudden they went from a pretty level Android playing field where they were all essentially competing with each other," Gartenberg said. "Now they're all competing with each other but suddenly competing with Google."
Gartenberg said the overall implications of the deal were "absolutely staggering."
"Suddenly you have Google, already a serious platform player, becoming a serious integrated vendor from end-to-end for everything from phones, tablets to television sets," he said.