When Google, the Net's dominant search engine, was approved to buy Motorola Mobility for a reported $12.5 billion, it acquired a portfolio of valuable hardware patents that instantly positioned it as a major competitor in the manufacturing of smartphones, tablets and TV set-top boxes. The announcement was made late in August of 2011, with the deal reaching finality during Q1 of this year. On Friday, The European Union (EU) released a public copy of its merger review, which sheds more light on the process involved in the merger, including talks with Apple and Microsoft regarding cross-licensing.

SEE: Patents Are Assets, So Learn How To Value Them

What They Gain
Millions of mobile phones, tablet computers and other telecommunication devices worldwide run on Google's Android operating system. Much like its peers in the smartphone industry, Android allows its users access the web, news feeds, a multitude of free apps, as well as view multiple open pages simultaneously. Numerous other features include cloud sync, Google Maps and customizable widgets that can be applied to the home screen.

With Google's acquisition of Motorola Mobile, the search engine giant now has a major foothold allowing it to push its Android system, which will grant them a strong ability to compete with Apple in the mobile and living room entertainment sectors. Google's acquirement of Motorola's patents, an estimated 17,000, will also give the firm additional ammunition for its long-term and enduring legal warfare with competitors over high tech patents.

Google reportedly paid a premium of more than 60% than the closing stock price of Motorola on the day of the initial offer, the biggest purchase in Google's history. Larry Page, Google CEO, has said he wants to "supercharge" the Android mobile OS.

"I think there's an opportunity to accelerate innovation in the home business by working together with the cable and Telco industry," he said, when Google's Motorola Mobility purchase was announced.

Page wants a bigger bite of Apple's market and wants to capture more of the handset market, worth billions worldwide. That means Google will now also be competing against Microsoft, Samsung and others in these areas.

As for the corporate structuring of Motorola Mobility, the Google subsidiary will do business as a separate entity beneath the Google umbrella and will continue as a licensee of Android. Android will continue, as previously, as an open system, available for use on its current and new devices as a "hardware partner," according to Page.

Social Media
Despite Google's acquisition of Motorola Mobility and its emerging challenge to its competitors in the mobile, telecommunications and social network space, performance of the Google + social network has been lackluster, so far. Data from research firm ComScore Inc. shows Facebook still outpacing Google +. Users are apparently signing on, but are not following up by using the network, according to ComScore.

A major problem for Google + is its inability to differentiate itself from Facebook, and that it has not established its customer value in the market.

An analyst at social media advisory firm Altimeter Group said, "Nobody wants another social media right now." Google, however, is betting against that proposition.

Google had been angling to get into the hardware end of the mobile and telecommunications business for some time now. In 2011, it lost a $900 million bid to buy about 6,000 patents owned by the Canadian firm Nortel, a maker of telecommunications devices. The entire Nortel company, patents included, was bought for $4.5 billion by a combination of firms including EMC, Ericsson, Microsoft, Research in Motion and Sony.

The Bottom Line
Motorola Mobility may or may not be worth the $12.5 billion Google paid for it, but now Google is set to own a major telecom hardware maker for its Android OS, which will be added to the ever-growing collection of companies owned by the corporation. Google is positioning itself to capture a bigger chunk of the market, if not corner it entirely. Google's chief competitors will undoubtedly mount a counter challenge to its threat and, thus, erode the firm's return on investment.

What's certain is that the global appetite for mobile devices seems voracious. In the second quarter of 2011, according to reports, a staggering 429 million mobile devices were purchased around the world. Equally healthy is the ongoing consumer hunger for new applications.

Data available from early 2012 disclosed that Android sales are increasing, with more than 700,000 smartphones activated every day. Some 250 million Android devices have been sold to date; but this is just the beginning, according to Page, who said that Google is still "very early in the monetization stage" of Android. Android is very profitable and will most likely be more so in the future.

Related Articles
  1. Investing News

    Who Does Cheap Oil Benefit? See This Stock (DG)

    Cheap oil won't benefit most companies, but this retailer might buck that trend.
  2. Budgeting

    The Honest Company Bundles Review: Are They Worth It?

    Learn more about The Honest Company and its bundle subscription services, which deliver discounted diapers, formula and other baby products to your doorstep.
  3. Stock Analysis

    The Top 10 Small-Cap Stocks for 2016 (ATI, ARCB)

    Discover the top 10 small-cap stocks expected to grow in 2016, complete with summaries and growth outlooks for each company and its expected price target.
  4. Budgeting

    Blue Apron Review: Is It Worth It?

    Read about one of the top meal-kit delivery services in the United States, and learn more about what it offers and how much it costs.
  5. Stock Analysis

    JCPenney's Path To Profitability (JCP)

    Learn about what J.C. Penney's management team has been doing to profitably grow its business as the company recovers from years of revenue declines.
  6. Stock Analysis

    3 Chip Makers Betting on the Drone Industry in 2016 (INTC, QCOM)

    Find out which of the big chip makers are betting heavily on a burgeoning consumer drone market that could be the next big wave in consumer electronics.
  7. Home & Auto

    The Latest Airbag Recalls: What to Do

    The latest warnings are from Honda/Acura and Dodge. How to look up your car – and what to do if you find it on the recall list.
  8. Economics

    What is a Complement?

    A good or service that’s used in conjunction with another good or service is a complement.
  9. Investing News

    Super Savings for Your Super Bowl Party? Bet on It

    Prices for wings, avocados and TVs are all coming down, which will make your Super Bowl 50 festivities less costly.
  10. Stock Analysis

    6 Risks International Stocks Face in 2016

    Learn about risk factors that can influence your investment in foreign stocks and funds, and what regions are more at-risk than others.
RELATED FAQS
  1. How does a cost-of-living adjustment (COLA) affect my salary?

    Some companies build salary adjustments into their compensation structures to offset the effects of inflation on their employees. ... Read Full Answer >>
  2. Where can you buy NetSpend reload packs?

    You can only purchase NetSpend reload packs at Giant Eagle, Albertsons, Roundy's and Pathmark supermarkets. NetSpend cards ... Read Full Answer >>
  3. How long does it take to execute an M&A deal?

    Even the simplest merger and acquisition (M&A) deals are challenging. It takes a lot for two previously independent enterprises ... Read Full Answer >>
  4. What does marginal utility tell us about consumer choice?

    In microeconomics, utility represents a way to relate the amount of goods consumed to the amount of happiness or satisfaction ... Read Full Answer >>
  5. What are some common ways product differentiation is achieved?

    There are many ways to achieve product differentiation, some more common than others. Horizontal Differentiation Horizontal ... Read Full Answer >>
  6. What role does the OEM (original equipment manufacturer) play in the finished product?

    Original equipment manufacturers (OEMs) do not typically play much of direct role in determining the finished product. However, ... Read Full Answer >>
Hot Definitions
  1. Liquidation Margin

    Liquidation margin refers to the value of all of the equity positions in a margin account. If an investor or trader holds ...
  2. Black Swan

    An event or occurrence that deviates beyond what is normally expected of a situation and that would be extremely difficult ...
  3. Inverted Yield Curve

    An interest rate environment in which long-term debt instruments have a lower yield than short-term debt instruments of the ...
  4. Socially Responsible Investment - SRI

    An investment that is considered socially responsible because of the nature of the business the company conducts. Common ...
  5. Presidential Election Cycle (Theory)

    A theory developed by Yale Hirsch that states that U.S. stock markets are weakest in the year following the election of a ...
Trading Center