Google Inc. signalled plans for a bold expansion Monday with the purchase of cellphone maker Motorola Mobility Holdings Inc., for a whopping US$12.5 billion in cash.
Motorola Mobility, which represents the electronics patents portion of the company, was spun off from the rest of the company in January.
Since then the stocks have suffered, and Google stepped in while the price was low, paying $40 per share -- a 63 per cent premium on Friday's closing price.
"The assets that Google is buying have been under selling pressure in the marketplace since Motorola Mobility was spun off," said BNN's Michael Kane.
"Its shares have been declining so Google is stepping right in there before any one else does and snapping up some very, very important and valuable electronics patents."
Google, the California-based search engine giant, and Motorola, the Chicago based smartphone maker, said Monday that the massive deal had been approved by both companies' boards.
Carmi Levy, a technology analyst, told Â鶹´«Ã½ Channel on Monday night that this is the biggest tech deal of the year.
"It's significant, it ups the ante," Levy said. "It sends a message to the market that Google's not going to sit down and let anyone steal its thunder."
Mark Blevis, a digital public affairs strategist, said this move changes the technology landscape.
"They're really getting into the smartphone game," Blevis told Â鶹´«Ã½ Channel on Monday afternoon.
"They're expanding, they have greater technology manufacturing behind them and they'll become a closer competitor to Apple."
Motorola, an early pioneer in the cellphone industry, has recently reinvented itself as a manufacturer of smartphones based on Google's Android platform.
"Motorola Mobility's total commitment to Android has created a natural fit for our two companies," said Google CEO Larry Page in a release from Google headquarters in Mountain View, Calif.
"Together, we will create amazing user experiences that supercharge the entire Android ecosystem for the benefit of consumers, partners and developers."
With Apple dominating the smartphone market, competitors are attempting to find ways to remain competitive against the iPhone manufacturer.
Blevis said that Google needed to catch up to Apple.
"Google really was lagging behind and they lost out on the Nortel patents," he said.
Google recently lost out to Microsoft Corp., Apple and RIM for patents from Novell Inc., a maker of computer-networking software and Nortel Networks, a bankrupt Canadian telecom gear maker.
Motorola has more than 17,000 patents on phone technology, three times more patents than Nortel did.
"They're shoring up their patent docket so they solidify their role within the mobile space," Blevis said of Google.
Elizabeth Woyke, from Forbes Magazine told Â鶹´«Ã½ Channel on Monday afternoon that the treasure trove of patents will be very useful for Google and its Android partners.
Consolidation moves such as the Google-Motorola purchase could be a harbinger of things to come, meaning Ontario's Research in Motion could also become a takeover target.
RIM has also seen its share value plummet in recent months and the company could be viewed as a good buy for potential consolidation.
"I think RIM, at this point with its position, is probably one that people are eyeballing as the next company to take over," Blevis said.
Monday's transaction is subject to regulatory and closing conditions and is expected to close by the end of 2011 or early 2012.
Google also added 60 per cent more employees with the consolidation, Woyke said.
Google's previous biggest deal was the 2008 purchase of DoubleClick for US$3.2 billion.
Kane said the $12.5-billion price tag for Monday's deal makes it the largest transaction in the tech sector in close to a decade.
With files from The Associated Press
