Google Inc.agreed to acquire Motorola Mobility Holdings Inc. 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.
Courtesy: Marketwatch Inc.
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