Google buys Motorola Mobility for US$12.5 billion; will continue being open

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Google has announced what may be a surprising, but looks necessary, deal to acquire Motorola Mobility – its handset division – in a deal worth US$12.5 billion, or US$40 a share. For investors, that represents a 63% premium on its closing price last Friday.

Motorola has been a big supporter of the Android platform – and its full support of the Android operating system actually saved it from the abyss where it was unable to replicate the success of its popular RAZR phone. Now, Motorola is gaining some sort of resurgence – and Motorola phones have been some of the more popular Android phones.

Together, we will… supercharge the entire Android ecosystem and will enhance competition in mobile computingLarry Page, Google CEO

Google’s acquisition means that it now will compete with Apple head on with mobile phones as it will now produce its own phones. Google notes that it will “supercharge the Android ecosystem and will enhance competition”. However, the deal could also alienate some of its other backers, such as HTC and Samsung.

Some of Google’s biggest partners – HTC, LG and Sony Ericsson – have added their voices to the deal, all of them supporting the deal (or they would have not been mentioned by Google).

“We welcome the news of today‘s acquisition, which demonstrates that Google is deeply committed to defending Android, its partners, and the entire ecosystem,” Peter Chou, CEO of HTC said.

Buying Motorola, as confirmed by Google’s own blog post written by Larry Page, also means buying a lot of patents that it could use to strengthen Android, and possibly the attacks from its rivals over at Microsoft and Apple. Motorola has 17,000 patents that cover a wide spectrum of mobile technologies, and after the fiasco over the Nortel patents that were recently acquired by a consortium of Microsoft, Apple and RIM, you can see their reasoning by buying Motorola – it’s the strongest Android player in terms of patents.

However, what will Google do with these patents? Play tit-for-tat with its rivals over patent infringement? Or could, and this a big stretch and highly optimistic, but try and use its now large patent portfolio in order to come to a deal where we could see all the mobile patents grouped in one pool and shared amongst each other and so innovation isn’t stifled?

Page also quelled fears that Android will not remain an open platform after the announcement.

“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,” Page wrote.

The deal needs to be approved by the US and the European Union, and could be done by early 2012 or at the end of 2011.

Full press release below:

Google to Acquire Motorola Mobility

Combination will Supercharge Android, Enhance Competition, and Offer Wonderful User Experiences

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.

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.

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