Google said it would pay $40 a share in cash for Motorola, a 63 percent premium to the company's closing price on Friday.
The deal shakes up the Android world. For the first time, Google will have a direct hand in the mobile business that it has fostered from a distance. While it provides the Android software critical to running millions of smartphones and tablets, it has yet to get into the design and manufacturing business itself, aside from a few experimental models with handset partners such as HTC and Samsung Electronics.
With Motorola, Google also gets a treasure trove of patents to defend itself and its partners with against a rising tide of legal opposition. Over the past few months, major technology players such as Apple and Oracle have sued either Google or its partners in an attempt to slow it down competitively and extract licensing fees.
Jha talked up the strength of its patent portfolio during the company's last quarterly conference call, suggesting he may get into the legal fray as well. The company already has an outstanding dispute with Microsoft and Apple. Last month, billionaire activist investor Carl Icahn disclosed that he was pushing for Motorola to sell its patent portfolio with the need for intellectual property at an all-time high.
Motorola, along with HTC, was a major early supporter of Android. Chief Executive Sanjay Jha scrapped the company's other projects and focused solely on Android, which paid off immensely when Verizon Wireless chose its original Droid to push as its hero phone during the 2009 holiday season. The company more recently had a flagship phone come out with the Atrix for AT&T, which Chief Executive Randall Stephenson used at one point, and also partnered with Sprint Nextel. Last month, it reported stronger second-quarter results, and hinted at a stronger fourth quarter.
But the company has struggled recently. While the Atrix featured heavy promotional support from AT&T, it wasn't a breakout hit. Its first tablet, the Xoom, failed to make a dent in the market, even after a price cut. And the company's long-delayed Droid Bionic for Verizon Wireless isn't expected until next month. The 4G capability for its Xoom is still unavailable despite hyping the feature at the Consumer Electronics Show in January.
It's unclear what role Motorola will play in Google, and whether it will continue to manufacture smartphones under its own brand.
Google, however, attempted to maintain its neutral stance in Android land even after the deal.
"Our vision for Android is unchanged and Google remains firmly committed to Android as an open platform and a vibrant open source community," said Andy Rubin, senior vice president of mobile at Google. "We will continue to work with all of our valued Android partners to develop and distribute innovative Android-powered devices."
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