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Google Acquires Motorola Mobility for $12.5B

15 Aug, 2011 By: Erik Gruenwedel

Acquisition expands YouTube parent from software to hardware manufacturer, including expansion into consumer electronics and set-top boxes

Google Inc. Aug. 15 said it would acquire Motorola Mobility Holdings Inc. for $12.5 billion, establishing the search engine behemoth as a major player in both the hardware and software markets.

Chicago-based Motorola is one of the largest manufacturers of mobile phones, including smartphones incorporating Google’s open-platform Android wireless software.

“The deal will create amazing user experiences that supercharge the entire Android ecosystem for the benefit of consumers, partners and developers,” Google said in a statement.

The largely all-cash deal helps Google control the rights to more than 24,000 patents, which should help the company deal with increased litigation regarding license fees involving the Android platform.

Specifically, Google recently has been sued by Oracle, Microsoft and Apple, among others, over intellectual property and third-party patents currently in use in the burgeoning smartphone market.

By acquiring Motorola’s 17,000 approved patents (another 7.400 are pending), Google can better safeguard itself against IP legal cases, according to Ralph Schackart, digital media analyst with William Blair & Co. in Chicago.

Google said the Motorola deal would not affect the open-platform status of its Android operation system.

Schackart said Motorola Mobility gives Google a new entrance point to the wide-open home consumer electronic market. Google has been trying to grow its nascent Google TV offering, but has struggled to date. Motorola Mobility manufactures Internet protocol-based set-top boxes for cable operators, notably AT&T’s U-Verse. Google now will be able to sell set-top boxes loaded with its Google TV operating system directly to cable operators.

“We believe that this deal also highlights Google’s desire to expand into consumer-oriented media, including set-top boxes and other home entertainment devices,” Schackart wrote in an Aug. 15 note. “Motorola Mobility makes set-top boxes for major cable operators, and Google could use this position to further push Google TV into homes.”

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