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Google is to buy mobile phone manufacturer Motorola Mobility for $12.5bn (£7.7bn), allowing it to mount a serious challenge to Apple as a technology manufacturer and take a bite out of the iPhone maker’s share of the smartphone market.
Google will pay $40 a share in cash for Motorola – a 63pc premium to the closing share price last Friday – in what analysts described as a typically “aggressive” move by the web search giant.
Larry Page, Google’s chief executive, said the deal would “supercharge” its Android operating system and help to extend it into areas other than smartphones.
However, observers claim the deal is really about Google gaining ownership of Motorola’s 17,000 patents and 7,500 pending patents – a massive armoury it can use to defend the mobile phone producers using its Android operating system against a steady stream of legal battles over infringements of intellectual property.
Android is already used by Motorola, as well as a slew of other mobile phone manufacturers, including HTC, LG and Huawei.
The acquisition, which is still subject to competition approval, will put Google in direct competition with customers who use its operating system.
Buying Motorola will also give Google the firepower to fight Apple head on as a technology manufacturer. Apple is the biggest smartphone producer in the world, accounting for 18.5pc of all handsets shipped.
However, Android is the most widely used operating system used in smartphones. According to research firm Gartner, it was installed in 46.8m handsets shipped in the three months to June 30 – 43.4pc of the total market – compared to 19.6m iPhone handsets with Apple’s iOS operating system installed.
Google was swift to allay fears it might abuse its dominant position, saying Android will remain open source – meaning it is available for use by any manufacturer – and that Motorola will operate as a separate company.
However, some analysts were sceptical this would remain the situation long term and said rival mobile manufacturers were less happy with the acquisition than they indicated in statements shortly after the deal was announced.
Subject to regulatory approval the acquisition is expected to complete in late 2011 or early 2012. However, Mr Page said he does not anticipate any problems: “We believe strongly that this is a pre-competitive transaction. It has added competition, innovation and increased user choice… It is not a horizontal transaction. Google has not been in the handset business [before].”
By owning the technology in users’ pockets, Google will be able to gather more information about its customers’ habits and whereabouts, enabling it to leverage the strong relationships it has with advertisers even further.
Motorola is also a significant producer of television set top boxes, potentially offering a boost to Google’s on-demand service, Google TV.
Motorola Mobility was created in January this year when Motorola, the company which created the first ever mobile phone, split into infrastructure unit Motorola Solutions, and the company Google wants to acquire.
Source: The Telegraph