Google to Acquire Motorola Mobility: Gaining Patents and Expanding into Mobile Hardware
On August 16, Google announced it would acquire Motorola Mobility for $40.00 per share, a 63% premium over the closing price of Motorola Mobility shares on Friday, August 12, 2011. The $40.00 per share price represents a total acquisition price tag of $12.5 billion, the largest acquisition in Google’s history.
According to a press release issued by Google, “The acquisition of Motorola Mobility, a dedicated Android partner, will enable Google to supercharge the Android ecosystem and will enhance competition in mobile computing.” Google intends to run Motorola Mobility as a separate business unit.
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.”
Motorola Under Pressure
Motorola announced plans to divide into two companies in March 2008. The two companies would focus on different business models with Motorola Inc. becoming Motorola Solutions Inc. Motorola Solutions makes radio equipment for emergency workers and scanning devices for retailers. Motorola Mobility took on the mobile phone market and television box tops.
Since the split took effect in January of this year, Motorola Mobility has been under pressure from billionaire investor Carl Icahn to maximize the value of its patent portfolio. Motorola Mobility claims to own more than 17,000 patents worldwide related to wireless technology. After Nortel’s $4.5 billion patent sale, the largest ever patent auction, it became even more important for Motorola Mobility to maximize the value of its patent holdings.
Icahn said in a statement after the acquisition announcement, “This is a great outcome for all shareholders of Motorola Mobility, especially in light of today’s markets. We applaud management and the board for acting so responsibly.”
Smartphones Arms Race
The Android operating system and Apple’s iPhone have turned the Smartphone market upside down over the past several years. Once dominant players like Research in Motion and Palm have seen their share of market significantly decrease as these new players have taken over the market.
While Google has not had a share of the hardware business, the acquisition of Motorola Mobility allows it to compete as it now owns the Droid handset. This puts Google squarely in competition with Apple’s iPhone as well as in competition with the manufacturers who support the Android operating system on their handsets.
Impact on Android
The most widely used mobile operating system in the US, Google currently offers the Android operating system free of charge to other manufacturers including Samsung, Sony Ericsson, HTC and LG Electronics. Google has said that Android will remain available to all manufacturers for free, that they have been in contact with those manufacturers and that they support the transaction.
According to Page, the acquisition of Motorola Mobility will “drive a greater user experience and accelerate innovation” with the Android experience. It is his belief that that Motorola’s strong patent portfolio will help Google protect Android from “anticompetitive threats from Microsoft, Apple and other companies.”
The transaction is expected to close by the end of 2011 or early in 2012.