Google Inc's biggest deal ever, acquiring Motorola Mobility Holdings Inc for $12.5 billion, is an attempt to buy insurance against increasingly aggressive legal attacks from rivals such as Apple Inc.
* Google paying steep price, no way around it
* Biggest acquisition ever buys insurance
* RIM, Nokia, Motorola leap, seen as winners
* Losers may include rival cellphone makers
The acquisition of one of the mobile telecommunications industry's most storied names is Google co-founder Larry Page's boldest move since taking over as CEO in April, launching the Internet giant into a lower-margin manufacturing business and pitting it against many of the 38 other handset companies that now use its Android software.
Motorola Inc was split this year into two: Motorola Mobility, which got the faster-growing cellphone and TV set-top box businesses; and Motorola Solutions, which sells gear like walkie-talkies to corporate and government clients.
Google is paying a massive 63 per cent premium to gain access to one of the mobile phone industry's largest patent libraries. The company had been under pressure to build a patent portfolio after losing out to Apple, Microsoft Corp and others in a recent auction of bankrupt Nortel's assets.
Unlike the Nortel deal and others, the fact that Google avoided having to compete in an auction for Motorola by engaging in exclusive negotiations for the company underscores the pressure it was under to bolster its patent portfolio. Paying such a rich premium even though it was the only buyer dovetails with analysts' view that the increasingly litigious posture its competitors have taken over intellectual property left the Internet search giant with no choice but to pay up.
No matter how you think about this, you have to look at it through the spectrum of the Android ecosystem under incredible attack from an IP (intellectual property) perspective. And this is Google going out and trying to fix that, said W.P. Stewart Advisors Chief Investment Officer Jim Tierney. The biggest implication here is that Google wants Android to be one of the dominant phone operating systems for years to come.
Wall Street quickly anointed Microsoft a winner in this deal, with Windows benefiting should the move spur current Android partners to explore other options.
The deal also stoked speculation that struggling Nokia and Research in Motion would become takeover targets themselves, sending Nokia's shares up 17.35 percent and RIM's up 10.3 percent.
Google made its first foray into hardware by co-developing the Nexus One phone with