Google (GOOG) recently announced that it completed the acquisition of Motorola Mobility (MMI) for $12.5 billion. The deal was not easy. It took Google significant effort to obtain regulatory approvals without conditions. The marriage of an internet company to a hardware company is often complicated.
Investors are wondering how an internet giant like Google can integrate with and run a hardware company that has been bleeding cash over the last few quarters. A quick answer is that Google can manufacture hardware in large quantities. Recall that Motorola was once a major mobile manufacturer. Its Motorola Razr model sold more than 100 million units. Looking at OEM market share data, Motorola holds a market share of 13.7%. This is down from the previous year’s share of 20%. The company later decided to manufacture phones on the Android platform, which saw strong market reception based on its reviews. Therefore, Motorola has a fighting chance to move up the ranks in the smartphone space.
The Motorola acquisition equates to a third of Google’s cash balance. Google recently reported an $86 million net loss for the first quarter, slightly higher than its loss for the same period last year. Total handset shipments declined from 9.3 million units to 8.9 million units. The silver lining is that smartphone shipments increased to 5.1 million from last year’s 4.1 million units. Clearly, Google sees continued high potential in the smartphone market.
Patent is just one of those investment merits of Motorola’s acquisition
The acquisition of Motorola solidifies Google’s position in the midst of its intellectual property battles. Google added 24,500 patents to its growing portfolio.To continue reading, click here.