It’s paying a 63% premium to buy Motorola Mobility (NYSE: MMI), giving it an intellectual property library in wireless telephony and putting its Android operating system on much firmer footing.
John Jackson of CCS Insight says:
“It is hard to imagine a business that is as non-core to Google as actually making phones, so I think it’s an open question what happens here but fundamentally we see this as having been about access to the intellectual property.
The $12.5 billion cash deal comes after a failed attempt to buy bankrupt Nortel’s patents. But there’s a danger that other handset makers, who license Android, could feel disenfranchised.
Google has stressed that Android will remain open to all and that it plans to run Motorola Mobility as a separate business.
While Apple’s iPhone has been a huge success, Android is actually the market leader, thanks to the support of many top phone makers, including Samsung.
And while those handset makers may worry about the impact of the deal, they could also benefit by the technology backing it gives the Android platform.
As Jackson explains:
“You could argue that the intellectual property that they are acquiring might be used to the benefit of the broader Android licensee community so this intellectual property may be used to the benefit of the likes of Samsung, LG, HTC and some of these other phone manufacturers out there who may be feeling a bit vulnerable given the intellectual property claims and lawsuits that are flying around in the industry right now.”
Google also gets Motorola’s set top box business, potentially giving its fledgling TV offering a much-needed boost, as well.
Bottom line: Google’s $12.5 billion deal to buy Motorola Mobility has the potential to shake up the smartphone business landscape, and position Google to better compete with rival Apple.