Peripheral Visions

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Google Purchases Motorola Mobility

On August 12, Google purchased Motorola Mobility, Motorola’s mobile division, for approximately $12.5 billion, or $40 per share, in cash. That’s about one-third of Google’s entire cash reserve. While the move may sound risky, the company expects a big payoff from its investment.  Motorola Mobility, a well-established, long-standing brand in mobile devices, can provide Google with knowledge regarding manufacturing hardware—a market that Google has yet to tap into. With the acquisition, Google will gain access to Motorola’s design and engineering processes. Additionally, Motorola Mobility holds approximately 14,600 granted patents, according to the company’s site, which also made it an attractive purchase for Google.

The acquisition is good news for Google stockholders, employees, customers and partners; which could be bad news for the competition.

The acquisition means major changes for Android, a dedicated partner of Motorola Mobility prior to the acquisition.  According to a Google press release, Google plans to “supercharge” the Android ecosystem. Although Motorola Mobility will continue to be a licensee of Android, and Google will operate Motorola Mobility as a separate entity, the structural changes will not only strengthen Android smartphones and devices, but is projected to change the smartphone environment, by significantly enhancing competition between mobile computing providers.

According to the Google press release, the acquisition will enable the company to defend Android and its partners from non-competitive threats from other companies, such as Microsoft and Apple. Prior to the acquisition, Motorola Mobility had hinted that the company may attempt to collect royalties on Android sales as a security measure. However, collecting royalties on sales could hurt the Android’s credibility and significantly raise retail prices. Google has also been threatened with litigation from mobile companies, including Apple, regarding IP, and smartphones and tablet design. Since the acquisition, Motorola will no longer need to consider collecting royalties on sales and Google can respond with counter suits to companies that accuse Google of any IP threats, since the company has gained access to the Motorola Mobility patents.

In addition to increased security, Google plans to make changes to the Android OS to enhance the smartphone’s user experience. Google will be able to tailor the hardware of the smartphone to its Android OS software, which should result in a phone with qualities that are superior to others on the market, including extended battery life, less bugs and greater performance and reliability, making Google a top contender with Apple, the first company to integrate their own software and custom hardware.

The difference between Google and Apple is that Google will not be the only manufacturer of devices utilizing the Android OS, as Apple is the sole manufacturer of the devices with Apple’s priority operating system. Other Android partners include Samsung, Sony Ericsson, LG, HTC, Acer and Lenovo. According to the Google press release, Google will maintain the original vision of the Android OS, maintaining the open platform that will enable other makers to continue to build devices on.

The transaction was unanimously approved by both boards, and is expected to close by the end of 2011 or early 2012.

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