SEC Filing Reveals How Motorola Had Google Over a Barrel

By Clint Boulton  |  Posted 2011-09-14 Print this article Print

Nothing like an SEC filing to shed light on the ins-and-outs of deals.

Motorola Mobility, which is in the process of being acquired by Google for $12.5 billion, filed a proxy statement explaining how the bid went down, including how Motorola got the search engine giant to sweeten the deal by $3 billion.

The filing chronicles the play from initial talks in July, to acceleration to get a deal done in August as Google's need for patents grew more intense.

Motorola revealed that in July Google CEO Larry Page, Android creator Andy Rubin, senior vice president of mobile at Google and other executives met with Motorola CEO Sanjay Jha to discuss the purchase of Nortel Networks' 6,000-plus patents by rivals and how it and the ongoing patent infringement litigation would affect the Android ecosystem.

That so-called Rockstar Bidco consortium shelled out $4.5 billion for Nortel's 4G LTE and other patents.

That's $3.5 billion more than what Google started the stalking horse bid at $1 billion in the sprint. Google later accused Apple and Microsoft of conspiring to keep Google down. Others would just call this cutthroat competition.

On Aug. 1, Google offered $30 a share for Motorola, which then traded at $22. Less than a week later, Motorola, with prominent high-tech investment banker Frank Quattrone leading the way, rejected the deal and boldly asked for $43.50.

Seeking to meet Motorola half way, Google upped its bid to $37 Aug. 9, Jha played hardball, asking for $40.50 or more. Google offered $40 a share.

Motorola's board met Aug. 10 via video conference to discuss the bid, and agreed that it would be preferable to broker a deal with Google or some other singular potential suitor than to hold a private or public auction.

On Monday, Aug. 15, Motorola agreed to sell to Google for the $40, a 63 percent premium over its stock price of $24.47 as of Aug. 12.

The chronicle certainly doesn't do Google any favors. One needn't have a law degree to smell the whiff of desperation here; Google could be paying Oracle hundreds of millions of dollars or more in its patent infringement case.

That Jha and Motorola wrenched more money from Google without even pulling another buyer into the mix to drive up the price points to a fear and desperation on the part of the search engine, which clearly felt it need the property.

There's no way Motorola would have commanded more money elsewhere, and it knew that. The calculated risk paid off. Google hopes that pay off cuts both ways.

Update: Florian Mueller's take is a must read, even if it seems contrarian to some.

His gist is that Google's Motorola bid wasn't about patent defense, but about defending itself from moves Motorola would make that would be detrimental to Android.

To that I say, fine. But who is to say the bid wasn't about both? Google needs Android to thrive, and part of the way to help that happen is to acquire more patent firepower. It's a chicken-egg thing. |

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