26 Google logoThis morning, Google has announced that it will acquire Motorola Mobility for $12B, which is a huge premium (60%+). This move is somewhat unexpected as it drastically changes Google’s position relative to other handset manufacturers who use Google’s Android operating system. Now Google has a vested interest in the Success of Motorola Android phones, which could create a conflict of interest, although Google says that “its vision of Android remains the same”. Google’s original goal with Android was mobile search engine dominance.

Why?

Google says that it is buying Motorola to “protect Android”.

You may have seen lately that Android handset makers have been under legal pressure, and some of them have been compelled to pay companies like Microsoft for infringing on Microsoft’s patents. Recently, Google was complaining that other companies were “ganging up” against it in a patent war, Microsoft fired back via Twitter.

The acquisition of Motorola Mobility would give Google a large array of patents that it may be able to use to fight back. As a web company, Google has little ammunitions that it can use to defend itself in the mobility space.

Side effects

Of course, other things could come out of this. For one, Google says that a more vertically integrated company (like… Apple) could provide a better user experience as the feedback loop between the Android team and the Motorolans could also make improvement iterations faster.

However, this acquisition could also create tensions with 3rd party handset manufacturers like HTC and Samsung, which may be worried about this as they rely heavily on Google’s software. They certainly don’t want to be one step behind Motorola. At least, Windows Phone would provide a more equal footing for all the players involved – maybe. Right now, Microsoft has a “special relationship” with Nokia.

It Motorola is successful and takes market share away from Samsung and HTC, tensions will rise. If Motorola does not deliver, Google’s shareholders will be infuriated as it will decrease the overall profitability of Google (depending of how accounting is setup).

Conclusion

This is very interesting, but in the final analysis, Google+Samsung Mobile would have been an arguably much sexier couple than Google+Motorola Mobility. Motorola, does have a broad portfolio of patents, and a breadth of experience, but they lack the industrial design edge, and Google isn’t likely to help Motorola on that front. Still, when two giants fuse, the result is always interesting to watch, for better, or worse.

Google had a “lean and mean” Mobile group. Now, it can either turn its mobile business into a fearsome Giant, or a disaster of Titanic proportions. What do you think?

Official Press Release

MOUNTAIN VIEW, Calif. & LIBERTYVILLE, Ill.–(BUSINESS WIRE)–Google Inc. (NASDAQ: GOOG) and Motorola Mobility Holdings, Inc. (NYSE: MMI) today announced that they have entered into a definitive agreement under which Google will acquire Motorola Mobility for $40.00 per share in cash, or a total of about $12.5 billion, a premium of 63% to the closing price of Motorola Mobility shares on Friday, August 12, 2011. The transaction was unanimously approved by the boards of directors of both companies.

“Motorola Mobility’s total commitment to Android has created a natural fit for our two companies. 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.”
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.

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

Sanjay Jha, CEO of Motorola Mobility, said, “This transaction offers significant value for Motorola Mobility’s stockholders and provides compelling new opportunities for our employees, customers, and partners around the world. We have shared a productive partnership with Google to advance the Android platform, and now through this combination we will be able to do even more to innovate and deliver outstanding mobility solutions across our mobile devices and home businesses.”

Andy Rubin, Senior Vice President of Mobile at Google, said, “We expect that this combination will enable us to break new ground for the Android ecosystem. However, our vision for Android is unchanged and 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.”

The transaction is subject to customary closing conditions, including the receipt of regulatory approvals in the US, the European Union and other jurisdictions, and the approval of Motorola Mobility’s stockholders. The transaction is expected to close by the end of 2011 or early 2012.

Filed in Cellphones . Tags: acquisition, Android, Google, motorola mobility and Smartphone.
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