Google today announced that it will acquire Motorola Mobility for $12.5 billion, citing the handset OEM’s “total commitment to Android,” as well as its strong patent portfolio as reasons for the deal. Shares of Motorola Mobility were up over 56 percent in early morning trading, to $38.40.
The boards of both companies unanimously agreed to the proposed deal, which Google said it hopes to complete by the end of 2011 or early 2012. Google said it will continue to run Motorola Mobility as a separate company and that the Android ecosystem will remain unchanged.
Motorola will remain an Android licensee and Android will remain an open platform.
In the wake of the news, many wondered how other partnering OEMs, such as Samsung and HTC, reacted to the deal. In a conference call this morning, Andy Rubin, senior vice president of mobile for Google, said he had talked with five of the top Android OEMs and “they all showed very enthusiastic support for the deal.”
Larry Page, CEO of Google, said he was excited about the acquisition, calling it an “extremely important” event in Google’s evolution.
But it was Motorola’s patent portfolio that seemed to lie at the center of the deal, which includes over 17,000 patents. After losing out on an auction of Nortel’s patents, Google had been searching for ways to protect Android in what’s become an increasingly hostile environment patent-wise.
Page pitched the acquisition as a benefit to the entire Android ecosystem, saying it would allow Google to “protect Android from anti-competitive threats from Microsoft, Apple and other companies.”
Kevin Burden, vice president and practice director of mobile networks at ABI Research, says the deal could be a double-edged sword for other Android OEMs. “Google has been relatively silent through the many legal problems its licensees have faced in defending Android. All its licensees are now feeling their legal positions have just been reloaded, but their allegiance to Android may be more at risk,” Burden said in a statement.
Analysts were generally positive about the deal. Carl Howe, director for Yankee Group’s consumer research group, says the acquisition dramatically improves Google’s position within the handset market overnight. “With this one purchase, Google picked up roughly 30 percent market share of all Android phones,” Howe noted.
Howe said the deal is utterly unique within the industry. “There is not a single example of a company both running a platform for a large number of manufacturers and manufacturing for that platform,” he said.
Howe also noted that Motorola’s strong carrier relationships will be a boon for Google, which currently has very few inroads with operators in the United States.
James Brehm, senior strategist with Compass Intelligence, said his initial reaction to the deal was that it was going to anger competing Android OEMs but after a closer look, he said little will change, as HTC and Samsung will continue to develop for multiple platforms, as well as Android.
While Brehm said the implications of the deal are far-reaching, including integration of Motorola’s home-based technologies like set-top boxes, he expects Google will be satisfied with its new patent holdings for the time being, remaining relatively hands-off on day-to-day operations.
Google and Motorola are set to file a proxy statement with the Securities & Exchange Commission (SEC) in the coming days that will further outline details of the deal.