Analysis of Google's Motorola Acquisition

bonch writes "Pundits have been analyzing Google's Motorola acquisition since its announcement. Dan Lyons, formerly known as Fake Steve Jobs, says Google never cared for the Nortel patents, and that they drove the bidding price up intentionally while negotiating to buy Motorola. This idea is questioned by MG Siegler, who believes buying Motorola for $12.5 billion — almost two years' worth of Google's annual profits — is an act of desperation. John Gruber notes that Motorola was threatening to wage a patent war against other Android partners during the time they would have been negotiating with Google, and that Motorola likely forced them into an expensive buyout rather than a patent license agreement. Google may have also been motivated by the fact that Microsoft was reportedly pursuing a Motorola buyout." S&P researchers apparently weren't a fan of the deal.

$12.5 billion doesn't mean anything by itself.

[NNKK]

Someone is confused by math and/or the word "almost".

MMI has billions in cash and equivalents on hand, and no debt. Google is effectively paying an amount roughly equal to their 2010 profits.

Not Motorola

[Snarky McButtface]

Google is purchasing Motorola Mobility. [wikipedia.org]

Re:I don't think they are surrounded

[postbigbang]

I don't think they paid that much $$ to become a Droid maker-- there are many less expensive ones to deal with. But it does put a red flag in front of Microsoft.

It's a game of chicken, where Google says, ok, lay off my pals that are making Android phones, or you have to sue, us, too-- and you don't REALLY want to do that, do you?

Moto can have flat revenues for the next decade but at a half-million new Androids registered a DAY, Google won't care. Apple knows that once you get users, they hate to leave and have to learn something new, get new contracts, and so forth. So unlike the junk they sold before, telcos get much more customer "glue" with affinity-based purchases based on operating system preference, and they know Apple and they know Android, and to a lesser extent, RIM and WebOS/Palm/HP. Windows? I guess we find out next month.

Re:Not Motorola

[Calos]

Which actually includes some odd things like set-top boxes and cable modems, at least according to the MMI websites.

Google made $8.5 billion in 2010, not $12.5

[jamrock]

Google is effectively paying an amount roughly equal to their 2010 profits.

I'm sorry, but what are you talking about? Google agreed to pay $12.5 billion for Motorola Mobility. Google's 2010 net income was $8.5 billion. Unlike you I didn't pull that figure out of my ass. That's according to Google's own financial statement [google.com].

According to the same statement their 2009 net income was $6.5 billion, so they paid nearly two years profit for MMI. Coupled with the facts that the $12.5 billion price represent a 60% premium over MMI's share price, and that Google agreed to pay a penalty of $2.5 billion if the deal falls through for whatever reason, this certainly smacks of desperation on Google's part.

And the deal could very well fall through. It's still subject to regulatory approval, and with Google being investigated worldwide, this is certain to ratchet up the scrutiny. And then there's good ol' Microsoft. What if they decided to play spoiler and offer more for MMI? I certainly wouldn't put it past them.