Google to Buy Motorola Mobility for $12.5 Billion

Google Inc, in another spending spree, is now buying Motorola Mobility Holdings Inc, the phone hardware maker for $12.5 billion. In the company’s largest acquisition yet, Google Inc now has the means to compete against rival Apple Inc, and to move forward in its smartphone marketing strategy.

Google Inc is spending $40 per share in cash, which is a generous 63 percent premium to Motorola Mobility’s Friday closing price on the New York Stock Exchange. Shares of Motorola Mobility, which focuses on smartphone and TV set-top boxes, jumped 59 percent on Monday.

This move will not only make Google a key mobile handset player and boost its Android mobile operating system; it also provides a more effective route into the home for Google’s TV service, thanks to Motorola’s set-top box business.

In a press release, Google CEO Larry page elaborates:

“The acquisition of Motorola Mobility, a dedicated Android partner, will enable Google to supercharge the Android ecosystem and will enhance competition in mobile computing. Motorola Mobility will remain a licensee of Android and Android will remain open. Google will run Motorola Mobility as a separate business.”

The purchase comes after Google’s failed attempt at a bid to buy thousands of patents from bankrupt Nortel. The deal opens up growing opportunities for both parties, but one of the main components of the deal, especially for Google, was to secure patents for its Android platform.

RBC Capital Markets analyst Ross Sandler adds:

Google is paying a significant premium to intrinsic value of Motorola Mobility, because there are few broad patent portfolios available in the marketplace today, and Motorola Mobility has one of the largest. Google (via Android) and the various Android original equipment manufacturers are likely facing significant risk of licensing fees and lawsuits around the intellectual property used to build Android from Oracle, Apple, Microsoft and others.”

With this deal, Google is showing its increased interest in the smartphone marketplace and its goal to compete against Apple on that platform. This is Google Inc’s largest acquisition yet but the Internet giant is expanding its portfolio and is showing no signs of slowing down.

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