UPDATE: Verizon Says Google Deal May Stabilize Patent Fights

Verizon Communications Inc. (VZ) said Google Inc.'s (GOOG) $12.5 billion bid for Motorola Mobility Holdings Inc. (MMI) was a welcome development because it may bring "stability" to a recent slate of smartphone patent disputes, though it stopped short of totally endorsing the proposed acquisition. It was the first time a U.S. phone company publicly commented on the blockbuster deal.

"We will be looking with interest as further details of the proposed transaction become clear," said John Thorne, Verizon's senior vice president and deputy general counsel. "But, at first glance, to the extent that this deal might bring some stability to the ongoing smartphone patent disputes, that would be a welcome development."

Verizon Wireless was the first U.S. wireless carrier to make a big bet on Google's Android software, and it relied heavily on Motorola's Droid smartphone lineup to combat the iPhone, which was exclusively distributed by rival AT&T Inc. (T). for four years. Even though Verizon Wireless started selling the iPhone earlier this year, it has a lot at stake as it still distributes millions of smartphones from Motorola Mobility and other device makers that support the Android system.

Verizon Wireless is the largest seller of Android phones in North America. In August, Verizon Wireless claimed about 41% of active Android phones in North America, compared with nearly 26% for Sprint Nextel Corp. (S), 16% for T-Mobile USA and about 9% for AT&T, according to a survey by Chitika, an online advertising provider. Google said it activates 550,000 Android devices daily.

By gaining Motorola's roughly 17,000 patents in the deal, Google said it could more easily protect its Android mobile software from lawsuits. Apple Inc. (AAPL), Microsoft Corp. (MSFT), and Oracle Corp. (ORCL) have sued Google, Motorola and device-maker HTC Corp. (2498.TW) over allegations of intellectual-property violations.

"Google should be in a much better position to protect itself and its partners from legal attacks," said Robert W. Baird & Co. analyst William Power, noting that Libertyville, Ill.-based Motorola has an additional 7,500 patents pending.

Verizon Wireless, co-owned by Vodafone Group PLC. (VOD.LN) and Verizon Communications, put significant market muscle behind the Android operating system, including running a national TV campaign and renting multiple electronic billboards in Times Square for several weeks around the launch of the first Droid smartphone in late 2009.

Android is the top-selling smartphone operating system world-wide, commanding around 43% of the market as of the second quarter of 2011, nearly double the second-largest, Nokia Corp.'s (NOK) Symbian, according to industry researcher Gartner. An AT&T spokesman declined to comment on the Google deal.

-By Greg Bensinger and Spencer E. Ante, Dow Jones Newswires; 212-416-4676; greg.bensinger@dowjones.com

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