Google on Monday announced plans to acquire handset maker Motorola Mobility for $12.5 billion in cash.
Google, in effect, now signals its move to steer away from just providing the mobile operating system, Android, that powers a huge percentage of the global marketshare already.
Google is to become a mobile manufacturer -- competing with Apple and Research in Motion directly.
The price of $12.5 billion represents a 63 percent premium on shares last Friday, with Google having in its reserve $39 billion at last count.
Putting these together, Google is paying a huge price for the handset manufacturer -- to build dedicated Google handsets for the Android operating system.
While Motorola Mobility will remain a licensee of Android, and Android will remain as an open operating system, Motorola Mobility will act as a separate business under the arm of Google.
Keen to highlight the 'openness' of the Android platform, the mobile operating system will still be available for "other hardware partners", Google CEO Larry Page said, adding: "Many hardware partners have contributed to Android's success" and is keen to "work with all of them to deliver outstanding user experiences".
As ZDNet colleague Ed Bott points out, Google has just "bought its way" into a lawsuit with Microsoft, as Motorola is being sued by Microsoft for infringement on Android's patents.
The shake-up to the market could not come at a worst time for the industry. However, the deal is subject to shareholder and regulatory approval in the United States and under the European Commission.
Google has bought itself a fight with Microsoft, and Apple and Google seemingly getting on far better than Apple and Microsoft ever have. Meanwhile, Google and Microsoft are still furious at each other after last month's very public patent spat.
This could be the nail in the BlackBerry coffin. If Android becomes the dominant operating system, squashing the BlackBerry marketshare and effectively ruining manufacturer Research in Motion, a third-party could be brought in to revitalise sales.
Could that third-party be Microsoft? If Google and Microsoft are still on mobile turf war with each other, I wouldn't be too surprised if -- push came to shove -- Microsoft acquired Research in Motion -- even if it was a retaliatory strike against Google's mobile venture.
ZDNet's Mary Jo Foley thinks otherwise. Microsoft is more likely to form strategic partnerships with other companies, without buying companies outright. Skype, of course, was an obvious exception, however.
Google and Motorola Mobility will hold a conference call with financial analysts to discuss this announcement today at 8:30am ET.
[More to come]