Google To Buy Motorola Mobility For £7.7bn

Google is buying Motorola Mobility – the US mobile company’s smartphone business – for $12.5 billion (£7.7bn), Google announced today, in a move designed to “supercharge” its Android ecosystem.

Under the terms of the deal, Google will acquire Motorola Mobility for $40 (£24) per share – a premium of 63 percent to the closing price of Motorola shares on Friday. The boards of both companies have unanimously approved the deal, which should be completed by the end of 2011 or early 2012.

Motorola Mobility will remain a licensee of Android and Android will remain open, said Google in a statement. Google will run Motorola as a separate business.

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

Strong patents portfolio

In a blog post, Page highlighted Motorola’s commitment to Android, having selected Android as its sole operating system in 2008. The company rolled out the Motorola Droid – the first truly successful Android smartphone in November 2009 – followed by more than dozen Android devices over the last two years.

Google also pointed to Motorola’s assets in intellectual property, which the company has amassed over its 80 years in operation.

“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,” he said.

According to Ovum analyst Nick Dillon, Motorola’s sizable patent portfolio is just as important to Google as its hardware business – particularly after it was outbid in the recent sell-off of Nortel’s patent portfolio.

“This move will put Google in a stronger position competitively,” said Dillon. “However, the move raises concerns for the wider Android ecosystem as the acquisition means that Google will become a hardware vendor. With this, Google will move from the position of partner, to that of competitor to Android handset manufacturers, potentially placing significant strain on the Android ecosystem.”

Dillon suggests a potential scenario in which Google provides preferential access to the Android code to its own hardware division, placing other vendors at a disadvantage and leading them to question their commitment to the platform.

“Given Google’s recent moves to exert greater control of the implementation of the Android platform, such as restricting access to the Android source code to select hardware partners, such a move is not beyond the realm of the imagination,” he said. “One beneficiary of any move away from Android would be Microsoft and its Windows Phone platform, as many larger Android manufacturers such as Samsung, LG, HTC and ZTE are also Windows Phone licensees.”

Legal battles

Motorola has suffered some misfortune with Android. The company in February of this year launched the first Android 3.0 “Honeycomb” tablet –  Xoom – which did not sell particularly well versus Apple’s iPad. Motorola also struggled with 4G product creation, delaying the Motorola Droid Bionic launch from the second quarter to the third.

The phone maker was sued for patent infringement by Microsoft and Apple last November. The Xoom is now set to become the latest target in Apple’s legal battle against Android tablet rivals.

Android currently commands 43.4 percent of the worldwide smartphone market, up from 17.2 percent a year ago, according to Gartner.

Clint Boulton contributed to this article