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8/15/2011
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Google Buying Motorola Mobility For $12.5 Billion

Search giant wants mobile hardware and software under one roof as it looks to beat Apple at its own game.

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Google, whose ubiquitous search engine redefined how consumers and businesses access the Web, turned its sites on disrupting the mobile industry Monday, announcing that it has reached a deal to acquire Motorola Mobility for $40 per share in cash, or about $12.5 billion in total.

The price represents a whopping 63% premium over Motorola Mobility's closing share price Friday.

The proposed acquisition, which would be the biggest in Google's history if approved by regulators, is a clear sign that the search giant intends to go head-to-head with Apple as a provider of complete mobile systems, chiefly Android-based smartphones and tablets, that feature tight integration of hardware and software. Also in Google's crosshairs: Microsoft and its partner Nokia, and RIM.

"Motorola Mobility's total commitment to Android has created a natural fit for our two companies," said Google CEO Larry Page, in a statement. "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."

In a blog post, Page said Motorola’s patent portfolio was also a factor in the deal. “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.” Both Microsoft and Apple claim Android violates some of their patents. The acquisition of Motorola Mobility could put Google in a better position to launch counterclaims.

Still, Google officials said the transaction, which requires approval from regulators in the United States and Europe, would not signal the end of Android as an open platform. They also said Google has no plans to end partnerships with other third-party hardware makers.

"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 our valued Android partners to develop and distribute innovative Android-powered devices," said Andy Rubin, Google's senior VP of mobile, in a statement.

Motorola Mobility was spun off from parent Motorola, Inc., earlier this year. Its two main businesses are mobile devices and digital set-top boxes. Company executives said the tie-up with Google will create a number of new marketing possibilities for Motorola Mobility, which will operate as a separate unit of Google.

"This transaction offers significant value for Motorola Mobility's stockholders and provides compelling new opportunities for our employees, customers, and partners around the world. 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 and home businesses," said Motorola Mobility CEO Sanjay Jha, in a statement.

The deal is part of an ongoing shakeup of the competitive landscape in the red-hot mobile industry as top vendors vie for position. Nokia, still the world's largest handset maker by volume, is in the process of porting the entirety of its U.S. product lineup to Windows Phone 7. RIM's share of the smartphone market is fading--its new tablet, the PlayBook, has underwhelmed many and this week was dropped from Sprint's 4G lineup.

Google's Android operating system, which currently runs on hardware from Motorola, HTC, and other vendors, is already the dominant smartphone and tablet OS in the United States, with a share of about 40.1%, according to Comscore. Apple's iOS holds a 26.6% stake, while RIM has 23.4% of the market. Windows mobility software has just 5.8%.

Motorola Mobility's share of the U.S. smartphone and tablet hardware market stood at 14.5% through June 30, behind LG's 21.3% share and Samsung's 25.3% stake.

Google said it expects the deal, which drew unanimous approval from the boards of both companies, to close by late 2011 or early 2012.

Get lessons from five companies on the front lines of implementing unified communications. Also in the new, all-digital supplement of Network Computing:Mike Fratto on how to make the case for UC. Download the supplement now. (Free registration required.)

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