Motorola Gets $2.5 Billion if Google Deal Doesn't Happen

 
on August 18 2011 7:34 PM

The announcement of Google's plan to acquire Motorola Mobility has sent analysts and bloggers into a fury of speculation about the possibilities and fine points of the deal.

One point that has risen to the top is the $2.5 billion reverse termination fee -- on the face of it, insurance for Motorola Mobility in the event that regulators decide that the deal is a serious antitrust issue. Should United States or European Union authorities block the deal, or even take too long to decide upon it (by Feb. 15, 2013 to be precise), Motorola gets paid $2.5 billion.

This is a recurring issue for Google, coming soon after the company tried and failed to win the high-stakes Nortel patent auction. Google had placed the original stalking-horse bid for the bankrupt Canadian telecom's vast portfolio of patents, and it was only the combined forces of Microsoft, Apple, and others that kept Google from going home with virtually all of the protection it needed in the escalating patent wars.

However, during the lead-up to the auction, each of the high-tech heavyweights that were vying for Nortel's patents were subjected to close scrutiny by U. S. federal regulators. And no wonder; any single owner could have conceivably tilted the playing field of the wireless and mobile device market too far in their favor.

More specifically, Google themselves have risen to the level that Microsoft occupied in years past, namely, that any deal that the company makes could be considered anti-competitive by government regulators. After the Nortel loss, however, Google can convincingly argue that the Motorola deal actually returns the 'balance of power' in the patent wars.

While the reverse termination fee is insurance, the staggering size of the fee may also be a way for Google to dismiss the issue (i.e., 'we know it can't go wrong so it doesn't matter how much we bet') or to express their readiness to put every resource to overcoming it (i.e., 'we're not giving $2.5 billion up without a fight'). And this level of dedication is not merely a message to Motorola, but also to the governments of the US and EU as well.

James Lee Phillips is a Senior Writer & Research Analyst for IBG.com. With offices in Dallas, Las Vegas, and New York, & London, IBG is quickly becoming the leading expert in Internet Marketing, Local Search, SEO, Website Development and Reputation Management. More information can be found at www.ibg.com. Navisis Financial Group believes that every client deserves a unique investment strategy. They can be trusted to manage your assets on a daily basis and respond rapidly to changes in the financial market.

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