Google buys Motorola mobile phone arm

Google has just announced that it will be buying Motorola Mobility, the US company’s mobile devices business, for $12.5 billion. It’s a surprise move, paying a premium of 63% over the shares closing price last week. Which leaves the obvious question – why?

Google has dabbled in hardware collaborations with HTC and Samsung with its Nexus-branded handsets, but buying its own mobile device manufacturer is a completely different matter. Motorola does have a good track record of making Android devices, though. We particularly liked its budget Motorola Flipout handset; and then of course there’s its much-talked about Motorola Xoom tablet.

The first though that comes to mind is that Google wishes to keep pace with Microsoft, with its recent ‘broad strategic partnership’ with Nokia. However, it’s almost certainly going to make other Android partners – such as Samsung, HTC and Sony – nervous that Google’s own manufacturer is going to get preferential treatment compared to the rest of the pack. We think that owning the operating system and all its related cloud-based services, is far more important and profitable in the long run than simple hardware sales.

Another key reason may involve patents. Motorola have been in the mobile device business for as long as anyone, and so should have a good number of patents related. With Samsung’s ongoing issues with Apple regarding sales of the Galaxy Tab 10.1, it may be that Google just felt the need to level the playing field with regard to patents – which are often offset against each other in legal negotiations.

What is certain, is that this is a huge move on the part of Google, and it will be interesting to see how the company integrates a hardware element into its software business.