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
    thanks to google I found you

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