Motorola Mobility sued by shareholder, says Google underpaid

Motorola Mobility sued by shareholder, says Google underpaid

Summary: A Motorola Mobility shareholder has sued both the company and Google, saying that the deal was vastly undervalued - even though it represented a 63% markup.

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When I predicted that Google's acquisition of Motorola Mobility would cause the company legal trouble, I didn't expect this exact scenario: investor John W. Keating has sued Motorola Mobility itself, its CEO Sanjay Jha, nine members of its board of directors, and even Google for failing to get a fair price on the deal.

In Keating's own words, as reported by Businessweek:

“The offered consideration does not compensate shareholders for the company’s intrinsic value and stand-alone alternatives going forward, nor does it compensate shareholders for the company’s value as a strategic asset for Google."

On the one hand, it's true that Google's getting a lot out of this deal. For $12.5 billion, the search giant gets a much-needed patent portfolio that can shield against lawsuits, greatly increased control over the Android ecosystem, and a general entryway into the hardware market.

But on the other hand, that $12.5 billion figure comes out to about $40 a share, or 63% over Motorola Mobility's closing price on August 12th. It seems that Keating figures the markup to not be generous enough.

Keating's complaint has been filed on behalf of all Motorola Mobility shareholders, and he's seeking class action status for the lawsuit. In fact, he's seeking an order to prevent the deal from completing. So far, neither Motorola Mobility nor Google has issued a reaction to the suit.

According to Businessweek, the case is Keating v. Motorola Mobility Holdings Inc., 11CH28854, in the Cook County, Illinois, Circuit Court, Chancery Division (Chicago).

Topics: Banking, Google, Mobility, Security, Wi-Fi

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31 comments
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  • RE: Motorola Mobility sued by shareholder, says Google underpaid

    Wasn't it $12.5 billion?
    This is absurd, you cant sue someone for trying to get the best deal they can. Why would google spend extra money than they have to?
    Frenz9
    • it is not an uncommon tactic

      @Frenz9
      The fact that Google paid a 63% markup on the share prices indicates to shareholders that Google was desparate to aquire Motorola.

      This desparation could lead Google to pay even more money per share, now that investors know why, and how bad, Google needs this purchase to go through.
      :|
      Tim Cook
      • RE: Motorola Mobility sued by shareholder, says Google underpaid

        @Mister Spock

        I don't think it'll go through. We'll find out next month after Mr. Schmidt sits in front of the FTC.
        The one and only, Cylon Centurion
    • RE: Motorola Mobility sued by shareholder, says Google underpaid

      @Frenz9 A Researcher with Financial Times at one point in time mentioned that Motorolla would have been done a HUGE favour if anyone bugs it out with $500 million.
      capaldi
  • RE: Motorola Mobility sued by shareholder, says Google underpaid

    Pardon my cynicism but I wonder who this shareholder is connected to?
    FrederickLeeson
    • RE: Motorola Mobility sued by shareholder, says Google underpaid

      @FrederickLeeson
      Funny, my thoughts as well...
      NetAdmin1178
  • When I pointed out that in the past companies have

    Been sued by it's own shareholders for all sorts of reasons I was told since I was talking about Apple I was of corse being silly:). Now Google is being being brought up as being sued by a moto shareholder funny that. To be honest I find the rational to actually sue Google a bit of a stretch. But to sue moto and or motos board I can see an argument there after all IP can be said to be Googled and yes Androids life line and the value to Google immense:)

    Pagan jim
    James Quinn
    • RE: Motorola Mobility sued by shareholder, says Google underpaid

      @James Quinn 63% over value is plenty, this guy has no clue and this will likely come to nothing.
      slickjim
      • RE: Motorola Mobility sued by shareholder, says Google underpaid

        @Peter Perry
        Nope, given the value of IP that would help Google from being attacked, I think it has to 100% instead of 63%. Eventhough MMI is near Chapter 11, I don't think their IP and engineering know how can't be just 63% more of its current rate. Just my 2 cents.
        Ram U
      • RE: Motorola Mobility sued by shareholder, says Google underpaid

        Why should they have paid double what it's worth? Are you crazy?
        Michael Alan Goff
      • RE: Motorola Mobility sued by shareholder, says Google underpaid

        @goff256 At double what MMI is worth, Google is still getting a heck of a deal. I'm actually surprised that another phone giant, like HTC or Samsung, hasn't tried to step in with a new offer for MMI. They'll eventually be bought out for about 16 billion, maybe a little more.
        Champ_Kind
      • RE: Motorola Mobility sued by shareholder, says Google underpaid

        @Peter Perry Agreed. 63% over value is an excellent deal.
        athynz
      • RE: @James Quinn 63% over value is plenty

        @Peter Perry

        What I would like to see happen here is, if this ID10T loses, and the deal completes; the legal costs to defend MMI in court <b>be subtracted from this ID10Ts payout!</b>

        Just deserts!
        fatman65535
    • Providing links to those statements

      @James Quinn
      could go a long way to validating your statement.

      :|
      Tim Cook
  • RE: Motorola Mobility sued by shareholder, says Google underpaid

    12.5 billion is correct, that maybe a typo? Suing motorola mobility maybe a right decision, we don't know the insides of company. It is very much possible that maybe motorola decision makers sold the company at a lower price then they should have, maybe there were some personal gains involved who knows!! From Google's viewpoint, they got a deal, so against them the case is useless.
    chrisjain
    • RE: Motorola Mobility sued by shareholder, says Google underpaid

      @chrisjain
      The lawsuit isn't against Google per se, but to prevent what is deemed a bad deal from happening. Therefore, everyone involved in the deal has to be mentioned now or later so all related information can be brought out during the lawsuit process.
      techrepublic@...
  • RE: Motorola Mobility sued by shareholder, says Google underpaid

    Anyone want to take a guess as to how much all this litigation ends up costing the end user? There has to be a significant price to living in a society where anybody can sue for anything when they don't like the outcome. Unhappy? Time to find a lawyer! Thats how it works out. If I owned a stock and the value instantly went up by 40% I would be ecstatic.

    And then there is the continual parade of high profile IP litigation. Any concept useful to the end user is a magnet for IP parasites, not to mention unhappy competitors. Nowadays all they have to do is pull out a sketch, registered with the government of course, and assert that yours looks similar to mine (Apple v Samsung in the EU), and bingo, lawsuit. None of these actions are enriching consumers or even stock holders, but they are lining the pockets of the legal industry and billionaire execs.
    George Mitchell
  • Nortel $4.5bn vs. Moto $12.5bn

    Google didn't try to bid more than $4.5bn for Nortel patents but now is willing to pay $12.5bn for Moto Mobility. Do they value the patents of Moto more than those of Nortel? What's the logic behind it? Or Google just simply miscalculated the implications of losing Nortel patents bid?
    experiac
    • Google was DESPERATE

      @funplace888 No doubt about it. The purchase of MotoMob by Google is a desperate move.

      Motorola was already threatening to sue other Android OEMs and one more mayor company suing (specially a company using Android and the one Google was giving preference) would had kill the platform.

      They paid $12.5bn for patents that will not help them in their current battle. The Nortel patents are for 4G mobile tech, while MotoMob's patents are mainly for RADIO and although it does have some minor cellphone component patents, non are for 3G or 4G tech.

      On the set-top box side, the main patent portfolio (QAM) is owned by VIZIO .... meaning Moto's patents (if any) may not be worth that much on this market.

      On the defense side .... the purchase makes very little difference. Even looking at the best case scenario for Google, the fact is that the patents will only protect MotoMob's products .... because Google never had a license for technology/patents owned by others and they definitely don't have the right to re-license them (for free) to Android OEMs.
      wackoae
      • I still see this as a blunder.

        @wackoae

        I am not complaining. 5K for a 3 month investment is not bad.

        But I see this as serious hurt for Google/Oracle. Google tried to make the point that Android had $0 value since it gives it away. Oracle has been saying Android's value is much higher.

        Given Google just paid 2 full years of all of Google's profits from all business units to protect Android, this gives Oracle ammunition that Android's real value is very high to Google. It has been questionable if the Android project was even coming close to being in the black and now there is no question it is in the far Red (makes MS's XBox losses look minor).
        Bruizer