Google acquires. later divests Motorola Mobility (wireless devices/patents)

Companies in Relationship

Google, Motorola Mobility

Deal Facts

Initial Announcement Date: 8/11

Consideration: $12.4B in cash; the preliminary valuation for acquired assets includes allocations of $2.9B to cash, $5.5B to patents/developed technology; .7B to customer relationships, .8B to other net assets, and $2.5B to goodwill. (Source: Google 10K)

Google announced an agreement to acquire Motorola Mobility for $40 per share in cash, or a total of about $12.5 billion, at a premium of 63% over the previous closing price of Motorola Mobility shares. Motorola’s product portfolio includes converged mobile devices such as smartphones and tablets, wireless accessories, end-to-end video and data delivery, and management solutions, including set-tops and data-access devices.

Strategic Implications

The acquisition of Motorola Mobility, which is a dedicated partner to Google within the Android ecosystem, is expected to substantially augment Google’s thin patent portfolio of about 2,000 patents, increasing it to approximately 20,000. With another 7,500 Motorola patents awaiting approval, the acquisition will enable Google to better defend itself against more fundamental IP attacks, and gain additional leverage in global patent negotiations and litigation. The transaction also allows Google to enter the handset business in a big way, attempting tighter hardware/software integration, which has so long been a key competitive advantage for Apple. Potential concerns however remain on the impact of the transaction on existing Android OEMs, who may now view Google as a competitor and therefore opt towards Windows or perhaps their own software strategies, thereby disrupting the Android ecosystem.

With more than 150 million Android devices now activated worldwide through a network of about 39 manufacturers and 231 carriers in 123 countries, the potential for capturing market share and enhancing the Android network remains huge for the newly merged entity.

Further, the acquisition of Motorola Mobility, which is the largest set-top box manufacturer in the world, may help Google’s efforts relating to Google TV, which has not gone off with a great start. Motorola’s scale in the set-top box market along with its key supplier relationships with the largest cable companies could kick-start Google’s growth in the living room, as it progressively becomes Internet connected through set-top boxes.

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