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Google agrees to buy Motorola Mobility for $12.5 billion

August 15, 2011 |  8:23 am

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Google Inc. has agreed to buy Motorola Mobility Holdings Inc. for $12.5 billion in what would be the company's largest acquisition to date.

Motorola Mobility is one of the biggest hardware supporters for Google's Android mobile operating system, making both smartphones and a tablet computer, called the Xoom, that run on the software.

The deal would also give Google a hardware-manufacturing business, possibly to compete better with rival Apple Inc., which makes both the hardware and software for products such as the iPhone and the iPad tablet.

Google said that its $12.5-billion price would be a premium of 63% over the closing price of Motorola Mobility shares on Friday and that the proposed purchase was unanimously approved by the boards of directors at both tech firms.

In the proposed deal, Motorola Mobility would remain a licensee of Android and Android would remain open and available for use by other hardware manufacturers at no cost, as it is now. Google said it would run Motorola Mobility as a separate business.

"We expect that this combination will enable us to break new ground for the Android ecosystem," said Andy Rubin, who as Google's senior vice president of mobile oversees Android. "However, our vision for Android is unchanged and Google remains firmly committed to Android as an open platform and a vibrant open-source community. We will continue to work with all of our valued Android partners to develop and distribute innovative Android-powered devices."

Google is currently being investigated by the Federal Trade Commission and the Justice Department for its dominance in advertising, search and possibly other businesses. Android is the most widely used smartphone OS in the world and its usage is still growing, so federal regulators are likely to look into possible antitrust concerns with the deal.

Larry Page, Google's CEO, made his case for the deal in a company blog post, noting that Google would benefit from owning patents held by Motorola as it has been fighting against what he called "anti-competitive patent attacks on Android." These efforts, Page said, included the teaming up of Microsoft and Apple to buy mobile tech patents from the bankrupt Canadian firm Nortel.

"The U.S. Department of Justice had to intervene in the results of one recent patent auction to 'protect competition and innovation in the open source software community' and it is currently looking into the results of the Nortel auction," Page said. "Our acquisition of Motorola will increase competition by strengthening Google's patent portfolio, which will enable us to better protect Android from anti-competitive threats from Microsoft, Apple and other companies." 

The takeover is also subject to approval by regulators in the European Union and Motorola Mobility’s stockholders. Google said it hopes to see the purchase approved and finalized by the end of 2011 or early 2012.

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-- Nathan Olivarez-Giles

twitter.com/nateog

Photo: Sanjay Jha, CEO of Motorola Mobility Holdings, speaks in San Francisco in 2010. Credit: Paul Sakuma / Associated Press

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