Google buys Motorola Mobility for $12.5bn

Added by Erik West on August 15, 2011

Google Inc announced on Monday that it agreed to buy Motorola Mobility on August 12 for $40.00 per share, or about $12.5bn – a premium of 63% over Motorola Mobility shares’ closing price on August 12.

The transaction was unanimously approved by the boards of directors of both companies. In a news release, Google stated that the acquisition helps Google turbo-charge the Android market and enhance the competitiveness of the mobile market. Motorola Mobility will be operated as a separate business and it will remain a licensee of Android.

“Motorola Mobility’s total commitment to Android has created a natural fit for our two companies. 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,” said Larry Page, CEO of Google.

Analyst Yun Kim of Gleacher wrote, “Given GOOG’s current cash position of $30bn+ and its ability to generate at least $6bn in free cash a year, we do not expect this acquisition to have much financial impact, including on its ability to do another sizeable acquisition. We view this acquisition, while expensive, as a necessary move by GOOG to protect its Android franchise.”

Google shares fell 2% on the news while Motorola Mobility is trading up 56% and is currently today’s most active stock on the S&P 500 index.

The industry overall as been moving towards companies aligning its hardware and software businesses, a move initiated by Apple with its iPhone and iPad. The move was followed by Microsoft earlier this year when it made an agreement with Nokia Corp who will adopt its smartphones to the Windows mobile operating system.

Google executives are reported to have said that the acquisition will protect their Android operating system from patent threats. In a statement on Google’s official blog Google states, “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.”

Current Android partners offered their support. J.K. Shin, President, Samsung, Mobile Communications Division said “We welcome today’s news, which demonstrates Google’s deep commitment to defending Android, its partners, and the ecosystem.”

Motorola was founded in 1928, and in 1983 was the first to introduce the world’s first commercial portable cell phone. The company split with its sister Motorola Solutions Inc. (MSI), which focuses on business and networking operations, in January 2011. The split helpedMotorola Mobility focus more on its core operations. Motorola reported a 28% rise in Q2 revenue, as a result of strong tablet sales, but offered little guidance for the current quarter due to delays in launching its 4G devices.