Google has announced a deal to buy Motorola Mobility for £7.7 billion ($12.5 billion).In a joint statement both of the boards said that they had unanimously approved the deal, which should be completed early in 2012.
Earlier this year, Motorola split into two separate companies.
Mobility develops and manufactures mobile phones, while Motorola Solutions covers wider technologies for corporate customers and governments.
Google is making a high-stakes gamble in the global smartphone wars.
The search engine and developer of the Android operating system for mobile phones is gearing up for its confrontation with Apple- who owns the iOS and also makes smartphones.
Google has suffered a number of mobile phone setbacks recently, most of them in patent courts. Motorola Mobility holds 24,500 patents, which should allow Google to imitate Apple’s strategy of slowing down rivals by taking them to court for alleged patent infringements.
Google’s problem is that buying Motorola leaves its other Android partners potentially high and dry. Will they get the same early access to the latest versions of Android? Will Motorola get that little bit extra when it comes to smartphone features?
Google has released statements from three Android partners supporting the deal. They’re clearly written with clenched teeth. To handset-makers, Microsoft’s new Windows Phone software will suddenly look quite attractive.
And it puts a question mark over Google’s new boss Larry Page. Does he have no better use for the company’s cash than buying a fickle hardware business? Is Google losing corporate focus?
Shares in Motorola Mobility jumped 56% by the close of trading in New York on Monday, to $38.13, still below the offer price of $40 per share. Shares in Google fell 1.8%.
Meanwhile, Nokia shares listed in New York had jumped 17% by the end of trading on news of the deal, with renewed speculation that the Finnish mobile phone company could become a bid target itself, with Microsoft a likely suitor.
The deal would allow Google to “supercharge” its Android operating system, the joint statement said.
Google said it would continue to run Mobility as a separate business.
“Motorola Mobility’s total commitment to Android has created a natural fit for our two companies,” said Larry Page, Google’s chief executive.
Sanjay Jha, his counterpart at Mobility, said: “This transaction offers significant value for [our] stockholders and provides compelling new opportunities for our employees, customers and partners around the world.”
The deal is subject to shareholder and regulatory approval.
Motorola was once one of the world’s most successful mobile phone manufacturers, but has fallen behind the likes of Apple, Samsung and HTC in recent years. Many of its handsets already use Google’s Android operating system.