Google Acquires Motorola Mobility - What Now?

Google (GOOG) has recently announced that they will be acquiring Motorola Mobility (MMI) for a whopping $12.5 billion. The deal was under wraps even within Google, as only top management knew about the acquisition up until this week, when Google officially announced their largest acquisition.

The acquisition shakes things up in an already competitive mobile-phone market comprised of giants like Apple, Microsoft, and RIM. What makes this acquisition more interesting is the fact that Google is the developer of the widely popular Android mobile operating system, which already comprises approximately 48% of the market share of worldwide phones operating systems (Canalys, 2011).

The Android operating system is designed by Google and is one

of the most popular operating systems in the mobile phone world.

Image Source: android.com

However, this poses antitrust and regulatory issues for Google in court. Google is optimistic that the acquisition will be given a green light albeit it is possible there will be several conditions set forth by the court. Such conditions include a "chinese wall" between Google's Android division and Google's hardware/manufacturing divisions for handsets to avoid any preference for Motorola products before other manufacturers such as LG, Samsung, and HTC. For example, Google may effectively seize more market share with Motorola if they choose to release new versions of Android onto their Motorola products prior to releasing them for use on other phones. In addition, if the acquisition does go through, Google has agreed to pay $2.5 billion in cash to Motorola Mobility--a sign of the regulatory risks involved with this acquisition.

Google's acquisition of Motorola Mobility may put Google in a stronger position to
compete with the Apple iPhone's huge market share in the mobile phone market.
Image Source: eastersealstech.com

One of the primary benefits of this acquisition is that Google will now have the ability to manufacture and design their own phones with ease, something that rival Apple has had the power of doing for years with their iPhone. Additionally, Google gets an arsenal of patents (17,000 and counting to be exact, with 7,500 pending) to defend their designs with. Recently patents have been an essential part of defending and attacking other companies which attempt to replicate certain design features and software features; for example, Apple recently sued Samsung over their Galaxy Tablet 2, which resembles the Apple iPad 2.

With the ability to manufacture phones on a much larger scale than before, as well as the ability to defend intellectual designs with thousands of patents, Google may be making quite a good decision in acquiring Motorola Mobility. Only time will confirm whether or not it was a good decision in the long run.