Android smartphones get 'ecosystem supercharge' [VIDEO]
Android smartphones and their users can thank Google for splashing out $12.5 billion to buy Motorola Mobility along with all the patents they hold. The purchase will be Google's largest.
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Buying patent protection offered by Motorola Mobility will be expensive. Although Google has $39 billion in cash and can easily afford it, the price translates to $40 per share, 63 percent above Motorola's stock price before the deal was announced.Skip to next paragraph
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Motorola Mobility Holdings Inc.'s stock soared 56 percent, or $13.65, to $38.12. Google Inc. lost about 1 percent and closed at $557.23.
The deal will test Page's ability to avoid a clash of cultures while he is still learning the nuances of the CEO job, which he took only four and a half months ago. With 19,000 workers, Motorola Mobility's payroll isn't that much smaller than Google's 28,800.
It's a coup for Motorola Mobility CEO Sanjay Jha and the company's largest shareholder, billionaire investor Carl Icahn, who had been pressuring Jha to cash in on the patent portfolio. With an 11.4 percent stake in Motorola Mobility, Icahn is in line to be paid more than $1.3 billion.
Motorola Mobility, based in Libertyville, Ill., has been struggling to come up with a product that has mass-market appeal since it introduced the Razr cellphone in 2005.
The company had some success with the Droid, one of the first phones to run on Android, but it now ranks a distant eighth in the smartphone market, with 4.4 million units shipped in the second quarter, according to research firm Canaccord Genuity. By comparison, the market-leading iPhone shipped about 20 million.
An attempt to counter the iPad hasn't paid off for Motorola Mobility, either. In an effort to drum up more demand, the company recently cut the price on the Wi-Fi-only version of its tablet, the Xoom, to $499 from $599.
The troubles saddled Motorola Mobility with a $56 million loss in its latest quarter, sinking the company's stock price to one of its lowest points since its January spinoff from the old Motorola Inc. The remaining part of that company now runs as Motorola Solutions Inc. In contrast, Google earned $2.5 billion in its most recent quarter ending in June.
Watch video of Google's choice to purchase Motorola Mobility here: