Google in $12.5bn Motorola Mobility acquisition

Google has made a big move in the smartphone and tablet market.

It has agreed to pay $12.5bn (€8.71bn) for Motorola Mobility.

It expects the deal to go through later this year and says it remains committed to its Android platform.

"We will run Motorola as a separate business," said Google chief Larry Page.

"Many hardware partners have contributed to Android’s success and we look forward to continuing to work with all of them to deliver outstanding user experiences.

"Our acquisition of Motorola will increase competition by strengthening Google’s patent portfolio, which will enable us to better protect Android from anti-competitive threats from Microsoft, Apple and other companies."

Shares in Motorola Mobility soared on news of the deal, which comes just eight months after the former Motorola split into two companies - Mobility, the handset company, and Solutions that supplies wireless services to business and governments and which is not part of today's deal.

Analysts said today’s acquisition marks a change of emphasis for Google as the battle with Apple and Asian rivals intensifies in the booming smartphone and tablet market.

Predictions are for the tablet computer market to grow more than 10-fold by 2015, with tablets running on Android tipped eventually to match or even overtake the current market leader, Apple’s iPad.

Patents are increasingly becoming a key weapon in the battle. Google recently lost a bidding battle over thousands of wireless patents owned by Nortel Networks to a consortium of Microsoft, Apple and Blackberry owner Research In Motion. Motorola Mobility has more than 17,000 phone technology patents.

Google expects the purchase, which was unanimously approved by the boards of both firms, to complete by the end of 2011 or early 2012.

In its last trading quarter, the internet search giant beat expectations after net profit for the three months to June 30 jumped 36% on a year earlier to $2.5bn (€1.7bn) and revenues lifted 32% to a record $9bn (6.2bn).

Its previous biggest deal was the 3.2bn (€2.2bn) spent on online advertising group DoubleClick.