Google to Buy Motorola Mobility for $12.5bn

Google has announced a deal to buy phone hardware maker Motorola Mobility for $12.5bn (£7.7bn).

In its biggest deal to date, Google said it would pay $40 per share in cash, a 63% premium to Motorola Mobility’s Friday closing price on the New York Stock Exchange.

Monday’s move, the company’s biggest foray into the hardware market, comes weeks after a failed attempt to buy patents from bankrupt Nortel.

The deal will give Google an intellectual property library in wireless telephony to wage war on Apple and Microsoft.

But the purchase, which took many in Wall Street by surprise, means Google risks alienating the hardware partners that license its free Android software.

Larry Page, Google’s chief executive, said on Monday that Android, the leading smartphone software, would remain open to all in what was seen as a move to allay investors’ fears.

“Motorola has a strong patent portfolio which will help protect Android from anti-competitive threats from Microsoft, Apple and other companies,” Page told analysts on a conference call.

John Biggs, editor-in-chief of CrunchGear, a New York blog covering gadgets and computer hardware, told Al Jazeera: “Motorola gets a shot in the arm. They have a second chance to make a difference in the mobile phone market.”

Page said that Motorola Mobility, which is based in Illinois, would be run as a separate company, licensing Android software in the same way as its rivals, which also include HTC Corp and LG Electronics.

Richard Windsor, Nomura Securities global technology specialist, said: “The danger is that other handset makers feel disenfranchised. Motorola is the weaker player. This could actually collapse the entire community.”

Motorola split into two separate companies earlier this year, with Mobility developing and manufacturing mobile phones, and Motorola Solutions covering wider technologies for governments and corporate customers.

The deal between the two would allow Google to “supercharge” its Android operating system, the joint statement said.

Google said it would continue to run Mobility as a separate business.

A joint statement said the boards of both companies had unanimously approved the deal, which should be completed by the end of this year, or early in 2012.

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