Google to buy Motorola Mobility for $12.5 billion

In its largest acquisition to date, internet giant Google yesterday agreed to buy cell phone maker and video technology provider Motorola Mobility Holdings, for $12.5 billion in cash.

Google had had offered to pay a whopping $2.5 billion if it decided to walk away from the deal.

The deal is also the largest acquisition in the technology industry this year, eclipsing the $9.5 billion purchase in May of Skype by Microsoft from Silver Lake Partners. (See: Microsoft acquiring Skype for $8.5 bn)

But the proposed acquisition is likely to be overshadowed by Microsoft, which is rumoured to be talking to Nokia in a $27-billion takeover deal.

Google, which has made 11 acquisitions so far this year and had about $39 billion in cash three months ago, will pay $40 per share, a 63-per cent premium to Motorola's closing price on 12 August.

Although Motorola makes cell phones exclusively on Android operating system and is one of the largest manufacturers of set top boxes in the US, the deal is more about laying hands on Motorola's trove of more than 17,000 patents on phone technology, nearly thrice the number of patents than Nortel Networks', that were recently acquired by a consortium of technology majors (See: Apple, Microsoft, Sony, RIM bag Nortel patents for $4.5 bn).