Google to buy Motorola Mobility for £7.7bn

Google stepped up its assault on the smartphone and tablet computer market today with the £7.7bn acquisition of handset maker Motorola.

The search engine group is to pay $12.5bn (£7.7bn) for Motorola Mobility in a deal which gives it direct control over one of the largest manufacturers of mobile phones running Android, Google's own operating system.

Journalist Jeff Jarvis, author of "What Would Google Do?", told Channel 4 News Technology Correspondent Benjamin Cohen that the deal is about patents: "This was an effort to match the Nortel patent deal and match Nokia with Microsoft so that Google can compete against Apple in a war of lawyers.

"What it does is it supports the Android operating system and makes every manufacturer who uses Android safer from lawyers coming after them."

Channel 4 News technology correspondent Benjamin Cohen assesses the implications of the deal: "Up until now, Motorola produced Android and Windows Phone 7 devices; following this deal, it is expected to only manufacturer Android phones. This will bring new revenue into Google and really for the first time extend the Google business beyond ones and zeros into physical products. It totally changes the direction of the company and is one of the first significant moves since co-founder Larry Page returned to the role of chief executive."
Read more about this story on Benjamin's technology blog

Patents are increasingly becoming a key weapon in the battle. Google recently lost a bidding battle over thousands of wireless patents owned by Nortel Networks to a consortium of Microsoft, Apple and Blackberry owner Research In Motion. Motorola Mobility has more than 17,000 phone technology patents.

The price, a 63 per cent premium to the value of Motorola Mobility at the end of last week, makes the deal the largest ever undertaken by the California-based company and was hailed by Google chief executive Larry Page as a "natural fit".

Shares in Motorola Mobility soared on news of the deal, which comes just eight months after the former Motorola split into two companies - Mobility, the handset company, and Solutions that supplies wireless services to business and governments and which is not part of today's deal.

Motorola Mobility is already a partner of Google, but will remain as a separate business and licensee of the Android operating system, which is the major competitor to Apple's iPhone operating system, and which will also remain an open platform.

Google expects the purchase, which was unanimously approved by the boards of both firms, to complete by the end of 2011 or early 2012.