Google Inc. (GOOG) agreed to acquire Motorola Mobility Holdings
Inc. (MMI) for about $12.5 billion, a move that would make Google
more competitive in the mobile-computing market.
The deal, which comes just eight months after the split of
Motorola Inc., would give Google control of Motorola Mobility's
attractive patent portfolio after the Internet giant recently
missed out on a bid for Nortel Networks Corp.'s (NRTLQ) portfolio.
Google, which owns the fast-growing Android operating system used
in millions of mobile phones, has a thin portfolio of wireless and
telecommunications patents.
Motorola Mobility shares soared 60% to $39.24 premarket,
approaching the offer price of $40 a share, which is a 63% premium
to Friday close. Google shares were down 3.2% to $546.50
premarket.
Google will run Motorola Mobility as a separate business that
will remain a licensee of Android. Google also said Android will
remain an open platform.
Google expects to complete the transaction by early 2012, and
it's been approved by the boards of both companies.
Most of the Motorola's revenue comes from smartphones and the
company has been working to diversify its customer base to defend
against the potential loss of Deutsche Telekom AG's (DTEGY, DTE.XE)
T-Mobile USA, a key customer.
Activist investor Carl Icahn, who is the company's largest
shareholder, had urged Motorola Mobility to explore options for its
patent portfolio in the wake of the Nortel deal that attracted
multiple bidders.
Following that defeat, Google had preliminary discussions with
InterDigital Inc. (IDCC) about a possible acquisition of the
wireless technology developer and licenser.
The smartphone and set-top box company split with its sister
Motorola Solutions Inc. (MSI), which is focused on business and
networking operations, at the beginning of the year. The separation
made Motorola Mobility nimbler and more focused on its core
operations, but it faces a highly competitive smartphone market,
including a persistent threat from Apple Inc.'s (AAPL) iPhone.
Last month, Motorola reported a 28% rise in second-quarter
revenue, thanks to strong tablet sales, but the device maker
provided weak guidance for the current quarter because of delays in
launching speedier 4G devices.
Meanwhile, Google's second-quarter earnings rose 36% on record
revenue as the Internet giant experienced strength in its core
search business and gained traction with its newer operations.
-By Melodie Warner, Dow Jones Newswires; 212-416-2283; melodie.warner@dowjones.com