The Monster of Mountain View is trying to make a monster deal:
In a bid to strengthen its mobile business, Google announced on Monday that it would acquire Motorola Mobility Holdings, the cellphone business that was split from Motorola, for $40 a share in cash, or $12.5 billion.
The offer — by far Google’s largest ever for an acquisition — is 63 percent above the closing price of Motorola Mobility shares on Friday. Motorola manufactures phones that run on Google’s Android software.
Considering that the feds recently initiated an antitrust investigation of Google, this is a rather aggressive move on Google’s part. $12.5 billion is nearly three times what Microsoft, RIM, Apple, Sony, and others put down to buy the patent portfolio of the now-defunct Nortel Networks. Google had been bidding separately for the portfolio, but it decided to pull out as the price went over $4 billion, leaving its competitors victorious.
Google will be pushing hard for this deal to go through. They are clearly ready to sweet-talk regulators for as long as it takes to win approval. They stand to pay a huge financial penalty if they can’t:
Google agreed to pay Motorola Mobility $2.5 billion if the deal falls through, a person familiar with the matter said. Motorola Mobility would pay $375 million if it decided not to sell to Google, the person said. Jennifer Erickson, a spokeswoman for Motorola Mobility, declined to comment on the breakup fee, as did Aaron Zamost, a spokesman at Google.
Motorola’s rivals – chiefly HTC and Samsung – might want to start rethinking their alliance with Google right about now. They’ve just been spurned.
Google may try to claim they are not aspiring to copy Apple’s business model, but such claims are laughable now considering the deal they announced this morning. There’s no way Google would pay such a premium for a phone manufacturer just to gain control of some patents. No, this is about Google entering the hardware business. Apple just took the top spot from oil giant ExxonMobil as the world’s most valuable company. Most of their revenue comes from selling hardware.
Google figures it can make a lot more money than it does now if it sells hardware and then serves up ads on the devices it sells. They want to exercise more control over the user experience. With Motorola Mobility, Google will be able to make its own phones, tablets, and dumbed-down laptop computers (Chromebooks). It is seeking to gain the power to dispense with partners and instead concentrate on building a fan club like Apple does.
Regulators should say no to this deal. They won’t, but they should. It’s bad for competition in the wireless industry and it’s bad news for user privacy and security.