As traditional handset makers continue to struggle, Google is swooping in to take full advantage. After losing the bid for the Nortel Networks patent portfolio, Google is set to acquire Motorola for $12.5 billion, or $40 a share. That's a 63 percent premium over the closing price of shares on Aug. 12.
Google described the acquisition as a move to supercharge its Android ecosystem. It said more than 150 million Android devices have been activated worldwide -- and more than 550,000 devices are activated every day -- through a network of about 39 manufacturers and 231 carriers in 123 countries.
"Motorola Mobility's total commitment to Android has created a natural fit for our two companies," Google CEO Larry Page said. "Together, we will create amazing user experiences that supercharge the entire Android ecosystem for the benefit of consumers, partners and developers."
Android Remains Open
Page noted that Motorola has a history of more than 80 years of innovation in communications technology and products, and in the development of intellectual property, that helped drive a mobile-computing revolution. Motorola introduced the first portable cell phone about 30 years ago and was a founding member of the Open Handset Alliance that worked to develop Android.
"This acquisition will not change our commitment to run Android as an open platform. Motorola will remain a licensee of Android and Android will remain open," Page stressed. "We will run Motorola as a separate business."
In a blog post, Page also took a jab at Microsoft and Apple, accusing the companies of anticompetitive patent attacks on Android. Page said Google's acquisition of Motorola will increase competition by strengthening its patent portfolio and protecting Android from anticompetitive threats.
Competing with Partners
Reaction from industry analysts is already pouring in. Some see Google's Motorola buy as a strong fit. Others are surprised. Still others, like Greg Sterling, principal analyst at Sterling Market Intelligence, see it from both angles.
"In once sense there is a good fit. But it's a surprise because now Google is competing against its partners, even though they say they are going to maintain an open ecosystem," Sterling said. "If you are a Google partner, you may feel that you are at a disadvantage."
Beyond the patents, Sterling said Google didn't need to make this purchase -- the largest in company history. As Page already noted, the Android operating system is performing strong in terms of handset-maker adoption. The acquisition could cause some Android partners to take a harder look at Windows Phone 7. But Google is nonetheless forging ahead.
"Mobile has become so important to Google that they want more control over the finished product," Sterling said. "Tablets that have come to market with Android on them have been failures, both in terms of user experience and sales. Apple has the ability to control the whole process. Google wants more of that control over quality, too."