Google acquires Motorola Mobility for $12.5 billion

Google Inc. (Mountain View, Calif., U.S.A.) announced on Monday the acquisition of hardware maker Motorola Mobility Holdings Inc (Libertyville, Ill., U.S.A.) for $12.5 billion, or $40.00 per share in cash.

The transaction was unanimously approved by the boards of directors of both companies. Motorola Mobility will remain a licensee of Android and Android will remain open, and according to Google Motorola Mobility will run as a separate business.

It was recently reported that Google’s Android platform had taken almost 50% of the global smartphone market. The Android, which was acquired by Google in 2005 and launched on phones in 2008, works with handset vendors HTC, LG and Samsung, along with Motorola.

“Something to keep in mind is what does this mean for HTC and LG and Samsung, all the other secondary handset vendors who created a lot of Androids. Does this make those handset vendors less important?” says Steve Hilton, principal analyst at Analysys Mason. “I don’t think so in the short term. I think Google still plans to dominate with Android and the only way to do that is to have multiple roots to market.”

The other handset makers have not issued an official statement on the acquisition, but JK Shin, president of Samsung’s global mobile communications division said in a statement on Monday, “We welcome today’s news, which demonstrates Google’s deep commitment to defending Android, its partners, and the ecosystem.”

Even though Google has 50% of the global smartphone software market, well above Apple’s 19% share, Apple is the world’s largest individual smartphone vendor, according to Reuters. Until now Google has only concentrated on software, while Apple has manufactured both devices and software.

“There is only one current Goliath in the mobile phone sector – Apple. And Google seeks to be the David who brings down the giant,” says Hilton. “I’m guessing Google won’t focus on cutting-edge form factors, but rather on the deep integration of device, OS and application.”

With its acquisition of Motorola Mobility, Google aims to compete with Apple in the smartphone market.

“The bigger issue here is Google’s realization that it felt like it was playing second fiddle to Apple, who is the one defining the latest and greatest of what mobile devices are going to be all about,” says Mason. “I think it started to annoy Google. I think the folks at Google want to have the chance to get up there and say we are going to define how the world is going to interact with mobile devices.”

In July, Google lost a bid to buy patents from Nortel to Microsoft, Apple, Oracle and other companies who joined together in the bidding. Google claimed the companies bought the patents in an effort to hamper Android software. Apple has also recently filed lawsuits again Samsung, Motorola and HTC, three of Google’s largest handset providers, for multiple patent infringements.

The acquisition still needs regulatory approvals in the U.S., the European Union and other jurisdictions, and the approval of Motorola Mobility’s stockholders. Google expects the transaction to close by the end of 2011 or early 2012. Shares of Motorola Mobility jumped 59% on Monday.

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