August 15th, 2011

Google to buy Motorola Mobility for $12.5bn – Why?

Google today announced a deal to buy Motorola Mobility for $12.5bn (£7.7bn).

A joint statement said the boards of both companies had unanimously approved the deal, which should be completed by the end of this year, or early  2012.

Earlier this year, Motorola split into two separate companies. Motorola Mobility manufactures mobile phones. Motorola Solutions provides broader technologies for corporates and governments.

“Together, we will create amazing user experiences that supercharge the entire Android ecosystem for the benefit of consumers, partners and developers.”  Larry Page, CEO of Google

Shares in Motorola Mobility jumped 57% in early trading in New York to $38.27, still below the offer price of $40 per share. Shares in Google fell slightly. Meanwhile, Nokia shares jumped more than 10% on news of the deal, with renewed speculation that the Finnish mobile phone company could also become a bid target.

“This transaction offers significant value for Motorola Mobility’s stockholders and provides compelling new opportunities for our employees, customers and partners around the world.”  Sanjay Jha, CEO of Motorola Mobility

Motorola was once one of the world’s most successful mobile phone manufacturers, but in recent years has fallen behind Apple, Samsung and HTC.

So what makes Motorola Mobility an attractive proposition for Google?

There’s no doubt that it will put Google in a much better position to develop the Android OS with specific hardware requirements in mind – in the same way that Apple develop iPhones and iPads in tandem with iOS software – enabling Google to create a better user experience on Android.

However, Google will need to tread carefully to ensure that other manufacturers, who currently use Android, don’t feel neglected  or disadvantaged. It was telling that, despite Google releasing curt endorsements for the deal from four other Android partners, Andy Rubin, Senior Vice President of Mobile at Google, said, “Google remains firmly committed to Android as an open platform and a vibrant open source community. We will continue to work with all of our valued Android partners to develop and distribute innovative Android-powered devices.”

“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, Mobile Communications Division

Despite Rubin’s statement, Microsoft’s soon to  be released update to Windows Phone software may now look more attractive.

But the real key to the deal may be patents and their use as a tactic to block competitor activity.

Google and its Android partners have suffered a number of setbacks recently in the patent courts, including the current block on sales of Samsung Galaxy tablets in Australia and many European countries. Motorola Mobility holds 24,500 patents, which should allow Google to imitate Apple’s strategy of slowing down their rivals by taking them to court for alleged patent infringements.

However, it remains to be seen whether Google stockholders and Android partners will view this as the right focus for  Google.

1 comment to Google to buy Motorola Mobility for $12.5bn – Why?

  • I liked your article is an interesting technology
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