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
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