By the numbers: Google, Motorola Mobility deal values hardware at 'next to nothing'

By the numbers: Google, Motorola Mobility deal values hardware at 'next to nothing'

Summary: Through the prism of hard cold numbers, it's clear Google's acquisition of Motorola Mobility was all about the patents.

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If you boil Google's $12.5 billion acquisition of Motorola Mobility to its core financial figures, the deal is really all about the patents. In fact, you could argue that Google paid next to nothing for Motorola Mobility's handset and TV set-top box operations.

Worth next to nothing?

Here's the math: Nortel's portfolio of 6,000 patents went for $4.5 billion. Motorola Mobility has 17,000 patents and 7,500 in progress. In a nutshell, Motorola Mobility's patent portfolio is roughly three times Nortel's arsenal. If you assume, Google paid market rates for patents Motorola Mobility's price tag is established easily. (Google statement, blog)

Mayuresh Masurekar, an analyst at Collins Stewart, said in a research note:

We believe the key benefit of this acquisition to Google is Motorola Mobility's large patent portfolio, with 17,000 patents and 7,500 more applications in progress. This portfolio should strengthen Google's position in any lawsuits related to Android (such as the Oracle lawsuit), and protect the fast growing Android ecosystem. Nortel Network's portfolio of 6,000 patents was recently sold to a consortium of companies for $4.5B. Assuming no significant difference in the quality/ effectiveness of patents, Motorola Mobility's patent portfolio (3x bigger than Nortel) would have been worth 3x the $4.5B Nortel deal, implying Google paid the market rate for patents and obtained the manufacturing business for next to nothing.

While patents are clearly the headline number, there are a few other figures to mention:

  • 19,000+: Additional employees Google will have to support after acquiring Motorola Mobility.
  • 45 million: Annual shipments from Motorola Mobility to support.
  • 66 percent: Jump in Google's headcount courtesy of the Motorola Mobility deal.
  • $4.04 billion: Projected revenue for Motorola Mobility in 2011 via Thomson Reuters estimates.
  • $157 million: Projected net income for 2011.
  • $3.3 billion: Google's projected net income estimates for the fourth quarter, according to Thomson Reuters.
  • 26 percent: Motorola Mobility's gross margins (2011 estimates).
  • 79 percent: Google's gross margins (2011 estimates).
  • 13: Number of new handsets from Motorola Mobility in the first half of 2009.
  • 4.4 million: Number of smartphones shipped in Motorola Mobility's second quarter.
  • 6.2 million: Number of feature phones shipped in the second quarter.
  • 63 percent: Premium paid by Google from Motorola Mobility's closing price Friday.
  • 56 percent: Gain in Motorola Mobility shares on Monday at midday.

Sources: Motorola Mobility, Google, SEC filings, Thomson Reuters data

Related:

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Topics: Legal, Google, Hardware, Mobility, Security, Wi-Fi

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10 comments
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  • The 3.3 billion is gross revenue not net. (nt)

    no text
    Bruizer
    • RE: By the numbers: Google, Motorola Mobility deal values hardware at 'next to nothing'

      @Bruizer <br><br>This deal must have you in a tizzy, eh?
      Return_of_the_jedi
      • RE: By the numbers: Google, Motorola Mobility deal values hardware at 'next to nothing'

        @Return_of_the_jedi and the $3.3 billion was net income. Thomson Reuters takes out TAC in the gross revenue projection.
        Larry Dignan
      • Motorola Mobility Net Income

        @Larry Dignan You forgot the MM net income numbers. Namely, that for the last 5 years, it averages a negative $30 million, even after Motorola Solutions acquired its debt prior to the divestiture.
        Your Non Advocate
  • Message has been deleted.

    doctorSpoc
  • $157 million profit for 2011 shows..

    ... that as a business they are basically worthless.. so looks like Google payed about right or maybe too much since Moto will bleed money for a few years to come and Google will like get distracted figuring out how to make it profitable or shut it down...

    the patent acquistion thing seem like a good idea but if Google doesn't handle this well it could be a huge distraction and a blackhole for money.. Google doesn't know hardware and Moto has demonstrated that given the current mobile landscape they don't know how to make money selling mobile devices..
    doctorSpoc
    • RE: By the numbers: Google, Motorola Mobility deal values hardware at 'next to nothing'

      @doctorSpoc I was once minority owner of a company... and I would certainly have loved seeing $157 million profit per year. :-)
      jgm@...
  • RE: By the numbers: Google, Motorola Mobility deal values hardware at 'next to nothing'

    Google paid entirely too much for Motorola Mobility, now they have to support the overhead too.
    LoverockDavidson
  • By the numbers

    Depends on what you mean by the numbers

    Motorola Solutions basically acquired all of Motorola Mobility's debt prior to the separation. Therefore Motorola Mobility was already heavily subsizided.

    Patents do not have a flat rate. Comparing one really good 3g or 4g patent from one company is not really the same thing as 100 patents on radio technology.

    So......was it a good deal for Google? Too soon to tell. This could be their next Orkut or it could lead to something useful. Was it a good deal for Motorola Mobility with a 60% price premium: You bet. Now they have a new sugar daddy with deep pockets.
    Your Non Advocate
  • Google is only paying $9.5 Billion

    I think people forget that Motorola Mobility has cash/cash equivalent of $3.05 billion (with a debt of just $98 million), so in essential Google is really only paying $9.5 billion. It also looks like MM has positive cash flow, so they are not bleeding money like some other was saying.
    SonofChef