Google has struck its biggest ever deal – to buy Motorola’s smartphone and tablet business for $12.5 billion in cash.
Both companies say the move will give a ‘supercharge’ to Google’s Android platform.
Android-based devices, which include Motorola’s smartphones and tablets – are the major rivals to Apple’s iPhone and iPad.
As such, the acquisition appears to be a decisive effort by Google to tackle to dominance of Apple head on.
Under the deal, Google will buy Motorola Mobility for $40.00 per share, a price that is 63% over the closing value of Motorola Mobility shares on Friday.
‘Motorola Mobility’s total commitment to Android has created a natural fit for our two companies,’ said Google chief executive Larry Page.
‘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.’
Analysts said access to Motorola’s intellectual property had clearly been a major motivating factor behind Google’s purchase.
‘What Google are actually buying here is not a mobile phone business at all,’ said Ben Rooney, technology editor at the Wall Street Journal.
‘What they are buying is this enormous suite of patents that Motorola – which is one of the oldest mobile phone companies out there – has built up over the years.’
The 17,000-strong patent portfolio which will pass into Google’s hands would shield it well in the ongoing patent war between smartphone and tablet makers, he added.
Following a split eight months ago, Motorola is a company of two parts.
As well as the ‘Mobility’ arm, which makes phones and tablets, it also has a ‘Solutions’ division, which develops technology systems for industry.
Mr Page admitted Google did not have experience with manufacturing devices, and as such planned to run Motorola Mobility as a separate business.
However he stressed that Google had a strong track record with acqusitions, having made 120 purchases in the past few years.
In order for the deal to go through, Google needs the approval of Motorola Mobility shareholders and competition regulators.
It said it was confident the acquisition would be cleared because it protected the future of Android, which is an open-source platform used by several other mobile device makers.
Yet this situation may prove to be an obstacle.
Other smartphone handset makers who use Android will want reassurance that the platform will not simply be tailored to Motorola’s requirements in future, analysts warned.
The race for the lead in US smartphone operating system (OS) consumer market share is tighter than it has ever been, according to November 2010 data from The Nielsen Company. Nielsen research indicates the popularity of the Android OS among those who purchased a smartphone in the last six months (41%) makes it the leading OS among recent acquirers, while Apple iOS retains a slim lead in overall market share.
Despite its surge among recent acquirers, when it comes to overall consumer market share, Android OS (about 26%) is still behind Apple iOS (close to 29%). RIM Blackberry’s position is less clear. Its share (also about 26%) puts it within the margin of error of both Apple iOS and Android. In other words, RIM remains statistically tied with both Apple for first and Android for third. Apple’s clear lead over Android notwithstanding, Nielsen says this race might still be too close to call.
All three smartphone OS leaders, Apple iOS, RIM Blackberry and Android, are benefiting from strong demand for smartphones. In November, 45% of recent acquirers chose a smartphone over a feature phone, while 31% of all consumers owned a smartphone.