Google buying Motorola for $12.5 billion

By Chris Hogg

Google has announced plans to buy Motorola Mobility for $12.5 billion in cash. The deal gives Google a stronger foothold in the mobile industry, putting it directly in the handset business, and positions Google to better compete with companies like Apple.

Google CEO Larry Page, made the announcement on the company’s blog, saying the deal will “supercharge Android.”

“Since its launch in November 2007, Android has not only dramatically increased consumer choice but also improved the entire mobile experience for users,” Page wrote. “Given Android’s phenomenal success, we are always looking for new ways to supercharge the Android ecosystem. That is why I am so excited today to announce that we have agreed to acquire Motorola.”

Google’s cash offer is $40 per share which is a 63 percent premium on Motorola‘s closing price Friday, and the deal is expected to close by the end of 2011 or in early 2012.

Google says it has activated more than 150 million Android devices, adding 550,000 new devices each day. The company boasts a network of 39 manufacturers and 231 carriers in 123 countries.

“Motorola has a history of over 80 years of innovation in communications technology and products, and in the development of intellectual property, which have helped drive the remarkable revolution in mobile computing we are all enjoying today,” Page said. “In 2008, Motorola bet big on Android as the sole operating system across all of its smartphone devices. It was a smart bet and we’re thrilled at the success they’ve achieved so far. We believe that their mobile business is on an upward trajectory and poised for explosive growth.”

Page says the acquisition will not change Google’s promise to keep Android as an open platform, saying Motorola will remain a licensee of Android and Android will remain open.

“This transaction offers significant value for Motorola Mobility’s stockholders and provides compelling new opportunities for our employees, customers, and partners around the world,” Motorola Mobility CEO Sanjay Jha said in a press release. “We have shared a productive partnership with Google to advance the Android platform, and now through this combination we will be able to do even more to innovate and deliver outstanding mobility solutions across our mobile devices and home businesses.”

While Motorola will run as a separate business, this deal marks the first time Google has had a hand directly in the mobile handset business.

“Motorola’s total commitment to Android in mobile devices is one of many reasons that there is a natural fit between our two companies,” Page said. “Together, we will create amazing user experiences that supercharge the entire Android ecosystem for the benefit of consumers, partners and developers everywhere.”

When the acquisition announcement was first made, questions arose around how HTC, LG, Samsung, Acer, Sony Ericsson and Lenovo would respond to the announcement.

Google says says the reaction has been positive, quoting positive responses from Samsung, Sony Ericsson, HTC and LG execs.

In the acquisition announcement, Page also took a shot at Microsoft and Apple, saying the companies are “banding together in anti-competitive patent attacks on Android.”

“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.”

According to Motorola, the company has 14,600 patents, with 6,700 patent applications pending worldwide.

Google says the Motorola acquisition will enhance competition, offer greater innovation and choice and a better user experience.