Google Motorola News- Google Buys Motorola Mobility

Google agreed to buy Motorola Mobility for $12.5 billion, or a $40 share. The $40 a share represents a premium of 63 percent to closing price of Motorola mobility shares on Friday.

What is Motorola Mobility ?

Motorola Mobility is a leading developer of communications systems used in the wireless and cable television markets. From the past two years, this company has a focus on Android-based smart phones.

Motorola represents around 11 percent of Android phones. Google is planning to run Motorola Mobility as a separate business besides maintaining Android as open-source. Google stated that its top five equipment manufactures were all supportive of the deal.

Few Reasons why Google bought Motorola Mobility by paying High Price

1) Motorola and Google have a strong relationship with each other. Motorola was one of the first companies to adopt Android and they are using it as its sole operating system within their smart phones.

2) Google's Nexus S handsets are not a big hit in the market. By using Motorola's handset expertise in design, manufacturing, distribution, Google can get benefit from them.

3) Google's deal to buy Motorola Mobility seems to be an expensive deal. Without buying Motorola Mobility, Google can opt for buying license. As per market analysts, "An ownership of the 17,000-plus patents as a long-term offensive bet for the company in the wireless segment."

4) As per some market analysts, the high price does not seem unreasonable. As per market estimations, Google pays $3 billion plus in annual hidden patent fee costs to the Android and the $4.5 billion spent on the Nortel patents.

5) According to few sources, "HTC is currently paying Microsoft a $5 per handset royalty, and Microsoft is seeking a $15 per handset royalty from Samsung for the use of Android. As per Raymond James analyst Shyam patil "Assuming 200 million annualized Android devices at a patent royalty of $5-15 per device, the patent fees could have potentially cost the Android ecosystem $1-3+ billion per year".

6) The main intention of the deal is to defend the Android system from patent attacks from Microsoft, Apple and Oracle. Motorola patents will help Google in any potential issues. Motorola Mobility has more than 17,000 issued patents and 7,500 pending patent applications.