Google Buys Motorola Mobility for $12.5 Billion. Crazy, or Not?

The big news is that Google is buying Motorola Mobility for $12.5 billion. That's a lot of cash and a 63% premium for the stock. It also comes after Google lost a bid for a sizable chunk of patents (over 6000) from Nortel.

Motorola makes the popular Droid line based on Google's Android operating system so Google will be in competition with the likes of HTC and Samsung who also make Android phones. According to iSuppli (see IHS iSuppli News Flash: Fast Facts on Google’s Purchase of Motorola Mobility), Motorola ranks 6th in the smartphone space in terms of shipments. While many are looking at Google's move into hardware I think that the Motorola has more to do with patents and for making itself a target.

Prior to this, Google had played with some hardware like the Nexus One. That didn't go over well and the rest of the Android market has taken off. It has also made the Android hardware vendors targes for companies with patent portfolios like Apple.

HTC and Samsung are being sued by Apple. Why not Google? Money.

Patent suits always work like this. Find the smallest target and hit them hard. Win and then move up the food chain.

Now with Google in the mix, courtesy of Motorola, the legal computation becomes much harder. It also places Google in a much better spot to defend Android, which is something it needs to do one way or another. Likewise, it allows Google to go on the attack if it wants to.

Uncertainty is what will worry most developers and this may or may not improve the situation for Android. That is going to take a year or more to develop. On the plus side, it does show developers that Google intends to support Android.

Hardware competition versus software distribution and support of Android will be part of the balancing act Google needs to play. It is not new and other major players have done similar things with varying degrees of success. Intel's purchase of Wind River had a major impact on a large number of embedded developers. Likewise, RIM's acquisition of QNX yielded the Playbook. Even HP's TouchPad tablet is based on work from Palm.

Like Intel/Wind River, an even handed approach with the competition tends to work. In the case of RIM and HP there is no competition, from a software standpoint, since they are the only ones to use the OS. On the other hand, app developers are free to utilize these platforms.

Google is one smart company so this purchase is likely to be good for Motorola's customers. How it fares for the rest of us, including app developers and the competition is yet unclear.

So what do you think? Am I, and Google, crazy, or not?

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