Google buys Motorola in £7.7bn deal

Google stepped up its assault on the smartphone and tablet computer market today with the £7.7 billion acquisition of handset maker Motorola.

The search engine group is to pay 12.5 billion US dollars for Motorola Mobility in a deal which gives it direct control over one of the largest manufacturers of mobile phones running Android, Google's own operating system.

The price, a 63% premium to the value of Motorola Mobility at the end of last week, makes the deal the largest ever undertaken by the California-based company and was hailed by Google chief executive Larry Page as a "natural fit".

Motorola Mobility is already a partner of Google, but will remain as a separate business and licensee of Android, which will also remain an open platform.

Shares in Motorola Mobility soared on news of the deal, which comes just eight months after the former Motorola split into two companies - Mobility, the handset company, and Solutions that supplies wireless services to business and governments and which is not part of today's deal.

Analysts said today's acquisition marks a change of emphasis for Google as the battle with Apple and Asian rivals intensifies in the booming smartphone and tablet market.

Predictions are for the tablet computer market to grow more than 10-fold by 2015, with tablets running on Android tipped eventually to match or even overtake the current market leader, Apple's iPad.

Patents are increasingly becoming a key weapon in the battle. Google recently lost a bidding battle over thousands of wireless patents owned by Nortel Networks to a consortium of Microsoft, Apple and Blackberry owner Research In Motion. Motorola Mobility has more than 17,000 phone technology patents.

Google expects the purchase, which was unanimously approved by the boards of both firms, to complete by the end of 2011 or early 2012.

In its last trading quarter, the internet search giant beat expectations after net profit for the three months to June 30 jumped 36% on a year earlier to 2.5 billion (£1.5 billion) and revenues lifted 32% to a record 9 billion dollars (£5.6 billion).

Its previous biggest deal was the 3.2 billion dollars (£2 billion) spent on online advertising group DoubleClick.

PA