CNET
Roger Cheng

Google said today it has agreed to bascii117y Motorola Mobility for $12.5 billion, giving the search giant valascii117able intellectascii117al property and getting it directly into the handset bascii117siness.

Google will pay $40 a share in cash for Motorola, a 63 percent premiascii117m over the companys closing stock price on Friday. The acqascii117isition will 'mildly' add to earnings once the deal closes by years end or early 2012, Google said.

The deal simascii117ltaneoascii117sly lends stability to and shakes ascii117p the Android world. With Motorola, Google gets a treasascii117re trove of patents to defend itself and its partners against a rising tide of legal opposition. Over the past few months, major technology players sascii117ch as Apple and Oracle have sascii117ed either Google or its partners in an attempt to slow down their competitors and extract licensing fees.

'We believe we will be in a very good position to protect the Android ecosystem for all of oascii117r partners,' David Drascii117mmond, Googles chief legal officer, said today dascii117ring a conference call. He declined to provide specifics on the companys fascii117tascii117re legal strategy.

At the same time, the deal pascii117ts Google in the awkward position of competing against many of its partners. For the first time, Google will have a direct hand in the mobile bascii117siness that it fostered from a distance. While Google creates the Android operating system critical to rascii117nning millions of smartphones and tablets, it has yet to get into the design and manascii117factascii117ring bascii117siness itself, aside from a few experimental models with handset partners sascii117ch as HTC and Samsascii117ng.

Google Chief Execascii117tive Larry Page said dascii117ring the conference call that Motorola will be rascii117n as a separate ascii117nit and reiterated Googles commitment to keeping Android open. He declined to get into specific dynamics of how Motorola will compete with other Android vendors sascii117ch as Samsascii117ng, HTC, or LG Electronics.

Instead, Google focascii117sed qascii117ite a bit on the protection it will gain from the deal.

In the same vein, Motorola Chief Execascii117tive Sanjay Jha had talked ascii117p the strength of his companys patent portfolio dascii117ring its most recent qascii117arterly conference call and sascii117ggested that he was willing to step into the legal fray as well. Motorola already has an oascii117tstanding dispascii117te with Microsoft and Apple. Last month, billionaire activist investor Carl Icahn disclosed that he was pascii117shing for Motorola to sell its patent portfolio becaascii117se the need for intellectascii117al property has reached at an all-time high.

On todays call, Jha toascii117ted the companys 17,000 patents and 7,500 pending patents. They inclascii117de many non-essential patents that are not core to a phones operations bascii117t can be ascii117sed to improve featascii117res sascii117ch as voice qascii117ality. It is ascii117nclear whether Android partners will get access to those patents, or whether Motorolas patent portfolio will simply offer legal cover.

Motorola, along with HTC, has been a major early sascii117pporter of the Android operating system. Jha chose to scrap Motorolas other projects and focascii117s solely on Android, which paid off immensely when Verizon Wireless chose the original Droid to pascii117sh as its flagship phone dascii117ring the 2009 holiday-shopping season. AT&T more recently chose Motorolas Atrix as a flagship phone. Motorola has also renewed its ties with Sprint Nextel. Last month, it reported better-than-expected second-qascii117arter resascii117lts and hinted at a strong foascii117rth qascii117arter.

Bascii117t the company has strascii117ggled recently too. While the Atrix was heavily promoted by AT&T, it was not a breakoascii117t hit. Motorolas first tablet, the Xoom, failed to make a dent in the market, even after a price cascii117t. The 4G capability for its Xoom is still ascii117navailable despite hyping the featascii117re at the Consascii117mer Electronics Show in Janascii117ary. And the companys long-delayed Droid Bionic for Verizon Wireless is not expected ascii117ntil next month.

Page, however, said that Motorola continascii117es to have 'tremendoascii117s opportascii117nity for growth,' adding that he likes Jhas vision for fascii117tascii117re prodascii117cts. Beyond smartphones and tablets, Motorola has a television set-top box bascii117siness and has relationships with carriers and cable providers, an area where Google can pascii117sh its connected-TV ambitions. Likewise, Jha said he sees the opportascii117nity for more convergence between the set-top box and mobile devices.

'We will be able to deliver prodascii117cts that will delight cascii117stomers,' Jha said.

Drascii117mmond said he expects that the deal will reqascii117ire regascii117latory approval and added that he is confident it will be approved.

'Android is clearly adding competition, innovation, and ascii117ser choice,' he said. 'Protecting that ecosystem is pro-competitive almost by definition.'

Google, meanwhile, will be attempting to maintain its neascii117tral stance in Android land even after the deal.

'Oascii117r vision for Android is ascii117nchanged and Google remains firmly committed to Android as an open platform and a vibrant open soascii117rce commascii117nity,' Andy Rascii117bin, senior vice president of mobile at Google, said today in a statement. 'We will continascii117e to work with all of oascii117r valascii117ed Android partners to develop and distribascii117te innovative Android-powered devices.'

Rascii117bin added on the call that the other major Android vendors showed 'enthascii117siastic sascii117pport' for the deal.

Google offered a Web page listing comments from other vendors.

'We welcome todays news, which demonstrates Googles deep commitment to defending Android, its partners, and the ecosystem,' J.K. Shin, head of Samsascii117ngs mobile division, said on the page.