Google spends $12.5bn on Motorola to take on Apple

Google sent sent shockwaves through the mobile phone industry yesterday with its surprise acquisition of Motorola's smartphone and tablet computer business in a deal worth $12.5bn (£7.7bn).

Google's chief executive, Larry Page, said the $40-a-share cash deal for Motorola Mobility would "supercharge" its Android mobile phone operating system.

It is the first time Google has owned a phone hardware business and also its largest-ever acquisition, dwarfing the $3.1bn paid for DoubleClick in 2007. Mr Page said Motorola would be run as a separate business but would not say whether it would change the name of the 80-year-old telecoms group.

The deal, according to one senior telecoms industry manager, will put Google squarely up against Apple "in terms of hardware and software". It is also seen as an important defensive move to protect itself against what the company calls "anti-competitive patent attacks on Android".

"The key factor here seems to be Motorola's impressive patent portfolio," said Alison Hyde, a fund manager at Cavendish Asset Management.

The deal brings 17,000 patents, with 7,500 more pending, to Google. The fiercely competitive smartphone market has seen some of the biggest companies in the world heading to the courts over patent infringement. Intellectual property had "developed into a key battleground", Ms Hyde added.

Google said the purchase would "increase competition by strengthening Google's patent portfolio, which will enable us to better protect Android from anti-competitive threats from Microsoft, Apple and other companies".

More than 150 million phones running Android software have been activated around the world since the system was launched in November 2007.

The deal raises questions about how handset-makers would react to a rival being snapped up by Android's developer. Still, the major handset-makers to use Android – HTC, Samsung, LG and Sony Ericsson – all issued statements of support yesterday.