Google's Motorola Mobility purchase: Details reveal a panic buy

Google's Motorola Mobility purchase: Details reveal a panic buy

Summary: Details of how the Google-Motorola Mobility deal went down illustrate how jumpy the search giant was about its patent portfolio.

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Google was so jumpy about acquiring Motorola Mobility that it upped its price by $3 billion even though no one else appeared to want the smartphone maker.

How the deal went down is an interesting topic this am. The details of the Google-Motorola Mobility acquisition appeared in a proxy filing. The play-by-play illustrates a Google that was haunted by the Nortel patent auction and needed an intellectual property boost. For its part, Motorola Mobility was also worried about its ability to handle lawsuits. The two companies needed each other.

The proxy sets up how patents were a hot topic as soon as CEOs Larry Page (Google) and Motorola Mobility (Sanjay Jha) met about a potential deal (licensing or acquisition) in mid-July:

In early July 2011, Andrew Rubin, Senior Vice President of Mobile at Google, contacted Dr. Jha, Chairman and Chief Executive Officer of Motorola Mobility, to request a meeting to discuss the purchase by some of Google’s competitors of the patent portfolio of Nortel Networks Corporation and its subsidiaries (which we refer to in this proxy statement as “Nortel”) in an auction conducted by Nortel in June 2011, and the possible impact of and potential responses to the purchase.

Other execs joined in and:

The parties also discussed the impact of the Nortel auction, intellectual property litigation and the potential impact of such litigation on the Android ecosystem, Motorola Mobility’s patent portfolio and potential strategic options relating to the Motorola Mobility patent portfolio and Motorola Mobility, including the potential sale of Motorola Mobility to Google.

Jha also noted that Motorola Mobility didn't have the resources to fight lawsuits non-stop.

Then Carl Icahn, who owned 11 percent of Motorola Mobility, entered the picture. As the talks proceeded, Google figured it would offer $30 in cash per Motorola Mobility share. Motorola Mobility figured that wasn't enough. Icahn and the board noted that Google seemed willing to go higher. From the proxy:

On August 5, 2011, the Motorola Mobility Board of Directors met telephonically, including representatives of its financial and legal advisors, to discuss a response to Google. After consideration of a number of factors, including the then current status of the intellectual property litigation and the prospects of settling some or all of the intellectual property litigation, Google’s willingness to negotiate improved terms and concerns regarding the risks of an unauthorized public disclosure of the Google proposal, the Motorola Mobility Board of Directors instructed Qatalyst Partners and management to reject Google’s proposed $30.00 per share purchase price and determine whether Google would increase its proposed purchase price. After the meeting, a representative from Qatalyst Partners contacted Mr. (David) Drummond (Google's chief counsel) to reject the $30.00 per share offer and suggested that Google increase its proposed price to $43.50 per share.

On Aug. 9, Google upped its bid to $37 a share. Jha said he'd take $40.50 or higher. Later that day Google went to $40 a share.

By Aug. 10, Motorola Mobility was looking at other hypothetical strategic alternatives, but there really weren't any.

Motorola Mobility took the $40 a share and 63 percent premium. On Aug. 15, the Google-Motorola Mobility deal was announced.

Add it up and Google went $3 a share higher with little to no prodding. In other words, Google had to buy Motorola Mobility. First, Google needed the patents.  Second, Motorola Mobility would have crumbled under the weight of lawsuits. If that latter scenario played out, Google would lose intellectual property and a key party. Google's negotiating panic may have been justified.

Related patents:

Google and Motorola Mobility:

CNET:

Topics: Mobility, Google, Security, Wi-Fi

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  • RE: Google's Motorola Mobility purchase: Details reveal a panic buy

    Yep, and now they are so armed with these things that they can give some away to protect their OEMs.
    slickjim
    • RE: Google's Motorola Mobility purchase: Details reveal a panic buy

      @Peter Perry
      Motorola's patents are crap, read thew news. They did not prevent Apple or Microsoft from suing anyway. So how is that going to protect OEM's now. All it is is a delay tactic to sue Apple and hope they back down. My hunch is that 70+billion...that they will not back down at all.
      johnsuarez10
      • RE: Google's Motorola Mobility purchase: Details reveal a panic buy

        @johnsuarez10

        Do some research. ALL of these patents are crap! The news blips every time Apple brings a new complaint. They lack the competence and follow through to mention that something like 98% of the complaints are thrown out on their ear. Patents aren't SHIELDS, they're ARTILLERY, and WE consumers, engineers, and inventors are the collateral damage.
        tkejlboom
  • No such thing as a "Buy it Now" price

    Jha did a good job maximizing Motorolas shareholder value. He played Google well. Now Google will have to figure out how to deal with their irrational exuberance.
    Your Non Advocate
    • RE: Google's Motorola Mobility purchase: Details reveal a panic buy

      @facebook@... Agreed. Great job by Jha.
      Larry Dignan
  • BS

    Android and Motorola by extension don't infringe any patents. The deal was made on the merits.
    The Linux Geek
    • RE: Google's Motorola Mobility purchase: Details reveal a panic buy

      @The Linux Geek LOL! That must be why both companies are being sued left and right for patent infringement. Both companies are ripoff artists.
      jhammackHTH
      • RE: Google's Motorola Mobility purchase: Details reveal a panic buy

        @jhammackHTH
        those are frivolous lawsuits.
        Together google & MMI will have an iron fist to crush these lame patent trolls.
        The Linux Geek
      • RE: Google's Motorola Mobility purchase: Details reveal a panic buy

        @jhammackHTH

        Your logic is fundamentally flawed. You think patents are some kind of magical force. I think I shall call it, "The Sword and the Stone fallacy." Look to the case of the laser, observed in nature by Einstein in 1916. Yet somehow, some assholes were granted a patent on making lasers. We're not talking about a particular laser or a particular mechanism. The PTO granted a patent on a NATURALLY OCCURRING PHENOMENON, and it took them 20 YEARS to fix it! Patents are like carrying a bloody sword into a meeting. They aren't right or wrong. They don't convey any special righteousness. They are an open threat.
        tkejlboom
      • Why all that suing just now?

        @jhammackHTH
        Because a few big companies selling less on new markets than they want are trying to slow things down hoping to find the time to get their own products right? And worrying about their existing markets?
        Perhaps paying a little bit more on an PR campaign in the hope they can undermine trust in the competition?
        Just a guess.
        somereader
    • Agreed

      @The Linux Geek This Larry Page fellow sounds like an iphone fanboi.
      Your Non Advocate
    • RE: Google's Motorola Mobility purchase: Details reveal a panic buy

      @The Linux Geek

      Cheap Hong Kong counterfeit knock off crap... Google.
      audidiablo
    • RE: Google's Motorola Mobility purchase: Details reveal a panic buy

      @The Linux Geek Denial of the facts is a terrible thing.
      athynz
  • RE: Google's Motorola Mobility purchase: Details reveal a panic buy

    I just got a $ 829.99 i-P??d2 for only $ 103.37 and my mom got a $ 1498.99 HDTV for only $ 251.92, they are both coming with USPS tomorrow. I would be an id!ot to ever pay full ret??il pr??c??s at plac??s like W??lm??rt or B??stbuy. I sold a 37" HDTV to my boss for $ 600 that I only paid $ 78.24 for. I use I use http://alturl.com/ot3vc
    kevibdubose
  • RE: Google's Motorola Mobility purchase: Details reveal a panic buy

    My assumption is if Google has paid extra $3 bils for the deal, it kind of gets me in to thinking they already know what to do with patents that they got.

    www.meteortel.com
    Alex P
  • Moto was on its way to bankruptcy..

    Look at their financials... past year they have either actually lost money or just basically broken even.. when they started to threaten to sue other android manufacturers.. basically to monetize their patents.. then Google stepped in.. one thing to go after patents, but Google better not let itself get bogged down by a company that has shown total incompetence at actually making money in the current mobile arena.. moto has just been bleeding money since they've been spun out..
    doctorSpoc
    • RE: Google's Motorola Mobility purchase: Details reveal a panic buy

      @doctorSpoc
      stop reading Florian Muller's articles. They were debunked on groklaw and are always dead wrong.
      The Linux Geek
      • RE: Google's Motorola Mobility purchase: Details reveal a panic buy

        @The Linux Geek No they weren't. It's fact that Motorola was consistently losing money. This is not even up for debate you deluded idiot.
        jhammackHTH
      • RE: Google's Motorola Mobility purchase: Details reveal a panic buy

        @jhammackHTH
        +1
        Ram U
      • what are you talkinga about??

        @The Linux Geek.. who's reading Florian Muller.. go read the financial times.. Moto has been losing or just barely breaking even since they've been spun off.. that is a fact.. just go read any of Moto's quarterly realeases since being spun off.. why do you think they were spun off in the first place.. same reason that HP is spinning off it's PC business.. it's low margin, low profit business.. not in investors interest to keep it around.. in addition to Moto look at LG and Sony financials.. they also don't make any profit in mobile... LG's mobile business is in ever worse shape that moto's.. but don't listen to me.. just read their own financial that THEY put out... this is just a fact.. don't shoot the messenger..
        doctorSpoc