Google Buys Motorola For $12.5 B: Top 10 Reasons Why

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  • Motorola Logo
    Monday's acquisition thrusts Google deeper into the highly lucrative and competitive mobile computing industry, which in recent years has become a hotbed of patent disputes. In the mobile computing industry, armed with only 1,000-odd patents, Google was the only company with a pop-gun at a gunfight. However, acquisition of Motorola Mobility gives Google access to more than 17,000 patents (excluding over 7,000 pending patents) held by Motorola, which pioneered the cellphone business. And, by owning a healthy portfolio of patents, Google will now be able to successfully defend itself against a barrage of patent lawsuits filed by Apple, Microsoft and other rivals that want to stomp on the company's Android operating system. Google CEO Larry Page doesn't attempt to hide that fact. "Our acquisition of Motorola will increase competition by strengthening Google's patent portfolio, which will enable us to better protect Android from anticompetitive threats from Microsoft, Apple and other companies," Page said in Monday's conference call. According to Trip Chowdhry, an analyst with Global Equities Research, armed with the patent portfolio, Google can also help its Android partners such as HTC and Samsung, which are being sued by Apple. "Probably Google can use these patents to indemnify other Android partners against various IP infringements," the analyst wrote in a note to clients on Monday. Reuters
  • A Google homepage is displayed on a Motorola Droid phone in Washington August 15, 2011
    The acquisition underscores the importance of mobile computing, and Google makes no attempt to hide that fact. "With mobility continuing to take center stage in the computing revolution, the combination with Motorola is an extremely important event in Google's continuing evolution that will drive a lot of improvements in our ability to deliver great user experiences," Google CEO Larry Page said in a conference call following the announcement of the deal. That acquisition means Google, which has so far collaborated with HTC to build its Nexus phone, will now have its own hardware manufacturing operation for the first time. Reuters
  • Motorola's Droid X smartphone, which will be available through Verizon Wireless, is displayed during a news conference announcing its release in New York June 23, 2010
    It is true that Motorola has been struggling in recent times, especially in the smartphone and tablet race, against the likes of Apple and Android rivals such as Samsung and HTC. However, let's not forget that this venerable company has had its fair share of hits as well. Motorola became a force to reckon with in the cell phone industry with the launch of MotoRazr, which became a runaway hit, and smartphones such as Droid and Photon 4G have come close to challenging iPhone's stranglehold over the market. Reuters
  • The Motorola PHOTON 4G Summer (L) and the Motorola TRIUMPH Virgin Mobile Summer mobile phones are seen during their launch in New York June 9, 2011
    Apple has grown to become No.1 technology company because its products not only look better but also perform better. It has been made possible because Apple is an expert in marrying art with technology. Google, like Apple, is a big brand name and is an innovator. But, so far, it has lacked the hardware expertise of Apple. The acquisition of Motorola Mobility, however, makes Google the owner of both hardware and software and it could bridge that gap between Apple and Google. Most importantly, it may help the search giant produce products that marry art and technology. Reuters
  • The home screen is shown on Google's latest Android operating system, Honeycomb, on a Motorola Xoom tablet device following a news conference at Google Headquarters in Mountain View, California February 2, 2011
    The Android market is currently heavily fragmented. There's a different version of Android for tablet (Honeycomb) and smartphone (Gingerbread). This has caused problems to developers, who are being forced to develop applications (apps) for the fragmented Android market. Google has attempted to solve this problem by introducing Ice Cream Sandwich OS during I/O conference in May. Ice Cream Sandwich has been designed to integrate the smartphone and tablet variants of Android into one and elevate it to the same playing level as iOS, which runs the iPhone and iPad. Consequently, the gap between Apple App Store and Android Market Place will also narrow. However, Ice Cream Sandwich will not be out until later this year. Until then, Google can release the canonical version of Android in Motorola handset or tablet for developers to target and other handset makers to follow if they want full app compatibility. For the moment, Google has promised that Android will remain an open OS and that other manufacturers like Samsung LG, HTC or Sony Ericsson need not worry that Motorola will get special treatment. Google has also backed up its promise by saying Motorola Mobility's operations will continue to be independent. Perhaps Google will stick to its promise, but there is no doubt that Motorola's Android phones will be, sooner or later, the first among equals and the company will be Google's new flag-bearer for the latest and greatest in both hardware and software. Reuters
  • Motorola Atrix
    Despite being more than seven years in business, Google has mostly remained a one-trick pony, the bulk of whose revenue and profit generates from online search advertising. However, with Motorola Mobility under its belt, Google suddenly has a new business focus -- mobile computing -- in addition to at least $12 billion a year in new revenue, including $8 billion in mobile handset business. Reuters
  • A man uses his Motorola mobile phone
    Motorola might not be a forerunner in the smartphone race but it definitely is a force to reckon with in the global low-cost feature phone market. And the low-cost feature market is a lucrative one, especially in developing countries like China and India, as there's no threat from Apple. Reuters
  • Report: Apple Triggers Initial Production of iPad 3
    Google Android OS may have more market share across devices --but when it comes to being the gold standard in the smartphone industry, Apple iPhone has no rival. Since its launch in 2007, the iPhone has reigned supreme as the single most popular smartphone. The fact that Apple is a hardware-software company has helped in this case. However, for Google, the Motorola Mobility deal could be the missing piece in the puzzle. Google, which now controls the experience from software to hardware, can create Android phones to its exact specifications and take advantage of the latest advances in the Android OS, just like Apple does. Reuters
  • Samsung Galaxy S smartphone
    To date, all Android handset makers have been putting customized UI skins atop the Android OS. Though this has given each Android device a unique look and feel, it has also caused problems because the various handset makers had to coordinate with Google on issuing the updates -- and the updating process often got delayed. Moreover, Android users frequently complain that they get the impression that the Android OS is a cheap knock-off of the iPhone OS and it has been hastily cobbled together, leading them to face various problems such as battery life issues, crashing apps (including Google's own), confusing settings, spell-checking weirdness, and the like. Google can now tackle these problems as it can directly address the issues and pass on the solutions to its partners. Reuters
  • Google CEO Larry Page
    In conclusion, Google has struck the right note with Motorola Mobility deal. However, hurdles lie in the way. The deal needs to be approved by regulators, and if Google fails to complete the deal under certain circumstances, it would need to pay a reverse breakup fee of $2.5 billion to Motorola. And even if it is approved, it thrusts Google right into a fierce battle arena where there are four major hardware-software players: Apple-iOS; HP-webOS; Research in Motion-BlackBerry OS; and Nokia-Microsoft's Windows Mobile OS. Does this mean the end of MotoBlur? Perhaps. Can Google survive in the mobile computing market? Yes. Can it become No.1? Why not? What do you think? Is the acquisition a good thing for consumers? For the tech industry? For Android partners HTC, LG, Samsung, Sony and others? Will it help Google beat Apple? Leave your comments below. Reuters
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Internet search engine giant Google Inc.'s $12.5 billion acquisition of Motorola Mobility has shocked market watchers because the handset maker is struggling to keep pace with bigger Android rivals like Samsung and HTC -- but the deal could actually turn out to be Google's best move ever.

Google on Monday dipped into its $39 billion cash reserve to buy Motorola Mobility -- lock, stock and barrel -- for $12.5 billion, or at 63 percent premium over the target stock's Friday closing price.

The acquisition, Google's largest ever (the previous largest acquisition was purchase of DoubleClick for $3.1 billion in 2007), shocked the Wall Street, making Google's stock dip 2.6 percent to $549.23 soon after the announcement.

Investors were stunned because Motorola is not only the smallest of the major Android smartphone makers but it is also the only major Android handset maker whose share of the smartphone market declined in the second quarter. Motorola split into Motorola Mobility and Motorola Solutions Inc. in the first quarter of 2011.

While Motorola Mobility is responsible for making smartphones and consumer products such as burglar alarms and wireless routers, Motorola Solutions is into networks business and enterprise mobility solutions.

However, Google's move could be its best ever -- and there are 10 reasons why.

Start the slideshow to see why Google is willing to pay so much for Motorola Mobility.

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