Google to Buy Motorola Mobility for $12.5 Billion

Google agreed to acquire Motorola Mobility for $12.5 billion, a move to protect Android from the rampant patent infringement litigation and give Google a hardware counterpart to Apple.

Google (NASDAQ:GOOG) stunned the high-tech world Aug. 15 with an offer to buy Motorola Mobility (NYSE:MMI) for $12.5 billion. The company's largest purchase ever should give the search engine much-needed patent protection.

Google agreed to pay $40.00 per share in cash, a premium of 63 percent over Motorola Mobility's Aug. 12 closing price. Pending regulatory approval, the bid is slated to close by the end of 2011 or in early 2012.

Motorola Mobility will remain a licensee of Android, which will remain available to other hardware makers under an open-source license. Google intends to run Motorola Mobility as a separate business.

Motorola Mobility in 2008 eschewed Windows Mobile phone development in favor of Android. The company rolled out the Motorola Droid, the first truly successful Android smartphone in November 2009, backed by a $100 million marketing campaign by carrier Verizon Wireless (NYSE:VZW).

The phone maker has pumped out more than a dozen Android devices in the last two years, including the recent Motorola Photon 4G on Sprint.

Motorola also suffered some misfortune with Android. The company in February of this year launched the first Android 3.0 "Honeycomb" tablet, which did not sell particularly well versus Apple's iPad. Motorola also struggled with 4G product creation, delaying the Motorola Droid Bionic launch from the second quarter to the third.

With Android rising to capture 40 percent market share in the United States and more worldwide, the phone maker was also sued for patent infringement by Microsoft and Apple last November.

Those suits underscore the current climate of Android, over which Apple has also sued HTC, Samsung, and Barnes & Noble for their use of technology in Android devices.

Microsoft and Apple have also ganged up on Google to acquire patents from Nortel Networks, ideally for the purpose of keeping the technology rights away from patent-poor Google.

The patent wars and the ability to own and control an Android hardware maker are what made Google pull the trigger on this deal, as Google CEO Larry Page said it will entitle him to "supercharge the Android ecosystem and will enhance competition in mobile computing."

"Motorola Mobility's total commitment to Android has created a natural fit for our two companies," Page added. "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."

eWEEK will be listening in on the 8:30 EDT Webcast for follow-up coverage.