Google to Acquire Motorola Mobility Holdings

Recently, Google announced that it would acquire Motorola Mobility Holdings, the cell phone business that was split from Motorola, for $40 a share in cash. The deal is worth $12.5 billion. This acquisition is Google’s largest ever and is 63% above the closing price of Motorola Mobility shares on day of announcement. Motorola manufactures phones that run on Google’s Android software.

  • Android was launched in 2007, is now used in more than 150 million devices, with 39 manufacturers. It has become an increasingly important platform for Google.

The latest acquisition would turn Google into a full-fledged cell phone manufacturer, in direct competition with Apple. So, now Google is (also) a Mobile company. Its worth note that Google has been battling with Apple and Microsoft over patents. Motorola holds more than 17,000 patents.

Will Android remain open?

Yes. Larry Page, Google’s chief executive, has stated that “this acquisition will not change our commitment to run Android as an open platform. Motorola will remain a licensee of Android and Android will remain open. We will run Motorola as a separate business.” However, primarily, the latest Move of Google is aimed at saving the Android operating system (OS). Google’s mobile OS currently has a market share of over 43%. However, what Google lacks in its arsenal, is the requisite amount of patents that it can fall back upon in an industry slugfest.

What may Microsoft do?

Google, Apple, RIM and HP (which acquired Palm last year) are now having hardware and software in place. So, this would put pressure on Microsoft to follow the suit. In first half of 2011, the Microsoft had entered into agreement with Nokia to build Windows Phone 7 devices for it. It is possible that Google’s latest move may prompt Microsoft to again consider acquisition of Nokia. Some reports say that Nokia could be sold in a few weeks. Price $27 billion for the whole company.

How this acquisition is important?

It could also be the most significant game changer in the rapidly evolving world of high speed Internet. Till now, Google was an Internet and mobile phone operating system (OS) software player, supplying its Android OS to companies like Samsung, LG, Sony Ericsson and HTC, besides Motorola itself, which decided to make Android its sole OS in 2008. Now, the phone makers might start viewing Google-Motorola as a rival, although Google has been quick to address this apprehension, saying that it will continue to run Android as an open platform and run Motorola as a separate business. But the main reason seems to get to own Motorola’s impressive array of more than 17,000 existing patents, and 7,500 more that are pending, in mobile technology. This asset suddenly became important for Google after rivals Apple and Microsoft started suing Google for assorted patent violations. Buying Motorola’s patents now gives Google the intellectual property cover it needed in the mobile market.

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