Google has announced that it plans to buy Motorola Mobility for $12.5bn, subject to regulatory approval.
Google has offered about $40 per share in cash, a premium of 63 percent over the closing price of Motorola Mobility shares on Friday.
Motorola Mobility exclusively ships phones and its Xoom tablet with Google's Android operating system. The deal will mean that Google now has a hardware manufacturer to work with closely to develop Android, said Carolina Milanesi, research vice president at Gartner.
Google will also have control of Motorola's impressive patent portfolio, Milanesi said. Motorola Mobility said earlier this year that it owns about 24,500 patents.
But the deal may also create tension with other mobile phone manufacturers such as HTC and Samsung, which also ship Android devices, she said. Since creating Android, Google has rotated manufacturers with which to release new Android code, releasing the code to others about six months later.
Google may risk alienating those other manufacturers, but Milanesi said "all these vendors have invested so much in the platform, they won't quickly walk away from it."
Google may also want to speed up the development of its Android operating system on tablet computers, where it has been slower to catch on than on mobile phones, Milanesi said. The next release for Android, code-named "Ice Cream Sandwich," will be an operating system designed for tablets and mobile devices.
The acquisition of Motorola Mobility will enable Google to "supercharge the Android ecosystem and enhance competition in mobile computing," according to a news release. The deal will not affect how Android is developed, and the operating system will remain open, Google said.
The company will run Motorola Mobility as a separate business, Google said.
The transaction has been unanimously approved by the boards of directors of both companies and is expected to close by the end of 2011 or early 2012.
Larry Page, CEO of Google, said, "Motorola Mobility's total commitment to Android has created a natural fit for our two companies. Together, we will create amazing user experiences that supercharge the entire Android ecosystem for the benefit of consumers, partners and developers. I look forward to welcoming Motorolans to our family of Googlers."
Sanjay Jha, CEO of Motorola Mobility, said, "This transaction offers significant value for Motorola Mobility's stockholders and provides compelling new opportunities for our employees, customers, and partners around the world. We have shared a productive partnership with Google to advance the Android platform, and now through this combination we will be able to do even more to innovate and deliver outstanding mobility solutions across our mobile devices and home businesses."