Google delivered a shocker to start the week, announcing plans this morning to acquire mobile phone company Motorola Mobility — a major maker of Google Android devices — for about $12.5 billion in cash. It’s one of those game-changing moves that will take some time to sort out.

The big deal: Google is getting into the hardware business. Google says it will run Motorola as a separate business, and Android will “remain open” for others to use.

“Motorola Mobility’s total commitment to Android has created a natural fit for our two companies,” said Larry Page, the Google CEO, in the news release announcing the deal. “Together, we will create amazing user experiences that supercharge the entire Android ecosystem for the benefit of consumers, partners and developers. I look forward to welcoming Motorolans to our family of Googlers.”

Google CEO Larry Page

Motorola, based in Libertyville, Ill., employed 19,000 people as of March, and posted net revenues of $11.5 billion last year.

Also notable are Motorola’s intellectual property holdings — 17,000 granted patents and 7,500 patent applications worldwide — which Google is aiming use to bolster Android in ongoing patent disputes against Apple and Microsoft.

Both Microsoft and Apple have sued Motorola over patent infringement, part of a larger patent war.

“Motorola also has a strong patent portfolio which will help protect Android from anti-competitive threats from Microsoft, Apple, and other companies,” Page said this morning on a conference call. “Many hardware partners have contributed to Android’s success, and we look forward to continuing our work with all of them on an equal basis to deliver outstanding user experiences.”

Page noted that “key partners of the Android ecosystem” share Google’s enthusiasm for the deal, based on conversations with them.

Should be interesting to see if that remains the case as the acquisition plays out. Google buying Motorola could be difficult to swallow for companies such as Samsung and HTC, potentially creating opportunities for Microsoft’s Windows Phone to establish tighter partnerships with them.

No comment yet from Microsoft on the Google deal in general. Google’s Motorola acquisition is stirring speculation of further deals across the mobile industry, but it still seems like a stretch to imagine Microsoft buying Nokia.

Google says it’s aiming to close the deal by the end of this year, or early next year, after seeking regulatory approval. The purchase price is $40 per share, a 63 percent premium over Motorola’s closing price last week.

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  • Guest

    Congratulations to Motobility on a successful exit! This will be a big win for customers already accustomed to the market-leading Android OS in their pioneering Motorola devices.

  • Joe the Coder

    Google has always wanted to change the dynamics of the mobile phone
    business.  Nexus was their first attempt.  It’s starting to sound a bit
    like a Chinese curse, though. 

    From reading early writings, this feels like it’s more a patent play than anything else.  At least perhaps for the short term.  The long term success of this move depends on whether HTC and Samsung can be kept in the Android camp,  If I were them, I’d be setting up meetings in Redmond right now. Android has muscled into the lead on their backs, I have a hard time seeing Android being vastly dominant with a vertical model.  This may well be the thing that kick starts MS’s phone business.  

    So pluses: neutralizes patent threat (MAD doctrine), allows G to deliver a better integrated solution, gives G entree to cable TV business (some cog. dis. going on there)

    Minuses: Threatens the horizontal that got them to where they are, could reinvigorate MS.

    Prediction: RIM gets sold in the next 6 months.

  • Kevin Lisota

    If the primary motivation here is a patent play, this will be the death knell of Motorola’s phone business. Maybe not, but that certainly seems like the motivation here.

  • Kevin Lisota

    If the primary motivation here is a patent play, this will be the death knell of Motorola’s phone business. Maybe not, but that certainly seems like the motivation here.

  • Mike Mathieu

    Smart move to fight against a Linux-style patent FUD for Android.

    Did that tech consortium overpay for the Nortel patents last month?

  • Major Plonquer

    There has been no comment so far from Redmond probably because they haven’t stopped laughing yet. One comment from a Motorola exec that they would be happy to do a ‘Nokia-style’ deal with the Soft and Google panic and dump 12.5 BIG ones into a failing company.  A failing company that’s being sued by Apple and Microsoft for patent infringement too.  You couldn’t make this up.

    Meanwhile over in Asia (remember, that place where all the people live and where your phone comes from) you can bet your socks that Samsung, HTC, Huawei, LG, NTT, Lenovo, ZTE and the rest of the Asian handset and tablet manufacturers will be hearing the word ‘MeeGo’ in their morning management meetings this week.  

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