Google to Purchase Motorola Mobility for $12.5 Billion – Adds Patent Portfolio Plus Manufacturing Capability

In a shocking and possibly brilliant defensive move today, Google CEO Larry Page announced the acquisition of Motorola Mobility for $12.5 Billion in cash.

This is the biggest acquisition that Google has ever tried to pull off, but it brings manufacturing capability under the Google umbrella in addition to 30 years’ worth of patents, both of which should serve it well as Google’s Android mobile platform takes on Apple’s iOS and Microsoft’s Windows 7.

Android Mobile Market Share

One might wonder why Google would make a move like this even if to protect its free and open Android OS. According to Page:

Today, more than 150 million Android devices have been activated worldwide—with over 550,000 devices now lit up every day—through a network of about 39 manufacturers and 231 carriers in 123 countries.

Needham & Co. also reports that Android has captured the lion’s share of the market:

Android Market Share, Source: Needham & Co.

Is it Really All About the Patents?

After narrowly losing a bid for Nokia’s patents to a consortium including Apple and Microsoft last month, Google has come under attack from those companies for patent violations on Android. Both Motorola and Google boards must believe that this acquisition will even the scales.

Google said its offer of $40 per share (a 63% premium on Motorola Mobility shares as of market close on Friday) was already approved by both boards, and in typical fashion, shares of Motorola Mobility have jumped 56% today.

What Happens Next?

After the big news of the day has settled in and the champagne has stopped flowing, the two companies will have to step up to the long hard road ahead. Motorola is a a company that has been through very rough times with round after round of layoffs, spinoffs from a larger parent, and general hard times for the employees.

These hard times often create a survival culture that doesn’t foster innovation or creativity, something Google famously cherishes. Right now Motorola employees must be living the dream, but will it turn into a nightmare as the larger Google collective attempts to assimilate these employees – many of which may have been with Motorola longer than the average Googler has been alive?

My guess is that one of two things will occur:

• Google will ultimately embark on a course to energize and refresh the brand, which will be a difficult task but certainly something that cash, agressive recruiting from happier competitors, and discipline can accomplish.
• Google will pour an extra couple billion into Motorola and not be able to change the culture or trajectory, ultimately to shutter it, discontinue manufacturing, and get back to the business of software. While keeping the Motorola patents as a bonus gift with purchase.

So, what do YOU think is going to happen? Will this work? Did Google pay too much? And what’s going to happen to the innovative culture at Google once the Motorola people get there?