Google looking to take on Apple after $12.5bn deal with Motorola
GOOGLE looks set to go head-to-head with Apple after the internet giant agreed to buy the mobile phone arm of Motorola in a multi-billion dollar deal.
In its first significant foray into the hardware market, Google will pay $12.5bn (€8.65bn) for Motorola Mobility, which has made some of the most successful smartphones running Google's Android operating system.
As part of the deal, Google will pay $40 a share in cash for the company, a premium of some 63pc on the company's closing price last Friday.
The acquisition -- which took Wall Street by surprise -- appears to mark a shift in strategy for a company that had focused on shoring up its internet search and advertising empire with probes into video and social networking.
The deal also comes just weeks after the company lost out to Apple in a bidding war for a number of mobile technology patents owned by telecoms company Nortel Networks. A consortium including Apple, Microsoft, and BlackBerry maker Research In Motion paid more than $4.5bn for them.
Motorola Mobility, which is under pressure to seek strategic changes by activist investor Carl Icahn, gives Google more than 17,000 patents the company can leverage in negotiations with competitors such as Apple.
After being shut out of the Nortel deal, Google's chief legal officer David Drummond wrote a blog post accusing Microsoft and Apple of colluding to buy up patents and curtail growth of its Android mobile operating system.
Yesterday Google chief executive Larry Page echoed Mr Drummond's post, saying that Motorola had a strong patent portfolio that will protect Android from "anti-competitive threats".
"This is the next step in building their position in the mobile world so they can distribute Google products and services through mobile phones and tablets," said Clayton Moran, an analyst at Benchmark & Co in Florida.
"They want a success with the Android platform and this will enhance their position in the mobile marketplace, as well as defend their position through the patent portfolio."
While Apple's iPhone is one of the most talked about phones in history, Android has managed to surpass it as the market leader by winning the support of numerous phone makers, including Motorola's bigger rival Samsung.
Android controlled about 43.4pc of the smartphone market at the end of the second quarter, ahead of Nokia with 22pc. Apple ranked third with 18pc. But in buying Motorola, the firm risks alienating the hardware partners that license its free Android software.
Mr Page sought to calm the jitters by stressing yesterday that Android would remain open to all.
"The danger is that other handset-makers feel disenfranchised," said Nomura Securities global technology specialist Richard Windsor.
"Motorola is the weaker player. This could actually collapse the entire community."
As part of the deal, Google also gets Motorola's set-top box businesses, giving its nascent TV operation a much-needed boost by providing it with a more direct route into the home.
The deal is expected to closed late this year or early next year, pending competition approval. Motorola Mobility will be run as a separate company. (Additional reporting Reuters)