Google Wins EU, US Approval to Scoop Up Motorola and its Patents

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Last year when Google (NASDAQ:GOOG) announced its acquisition of Motorola Mobility (NYSE:MMI) for $12.5 billion at a whopping premium of 63%, this purchase seemed very expensive at the first glance. However, Motorola’s rich patent portfolio of over 17,000 granted patents and approximately 7,500 pending patent applications makes it a good strategic acquisition. [1]

This Monday, the U.S. department of Justice finally closed its investigation into Google’s acquisition of Motorola Mobility, though it did note that Google was more ambiguous than rivals Apple (NASDAQ:AAPL) and Microsoft (NASDAQ:MSFT) in affirming Fair, Reasonable and Non-Discriminatory licensing agreements for standard-essential patents (FRAND). [2]

Our $627 price estimate for Google stock is about 2% above the current market price.

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See our complete analysis of Google here

Google’s stance on FRAND ambiguous

The U.S. DOJ correctly identified Google’s stance on FRAND as ambiguous. In our earlier note titled Google Promises EU Regulators it Will Play Nice While Motorola Goes After Apple, we discussed how Google’s promise to follow fair licensing for Motorola patents is questionable.

We also recently discussed how Google stands to gain from Motorola’s aggressive patent suits against Apple and Microsoft recently, see Is Motorola Doing Google’s Bidding with Patent Suits on Microsoft & Apple?

Google gains Motorola’s rich portfolio of patents

Patents have started to play an increasingly important role in the smartphone industry as companies jockey to build up their portfolio of patents. With an arsenal of patents, large companies can deter others from suing it for patent infringement. Google has lagged in this area and given the rising importance of its Android platform and the mobile boom, it needs these patents to protect its growth. It will be interesting to see how will Google leverage Motorola’s rich portfolio of patents, now that the acquisition has been approved.

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Notes:
  1. Number of patents information mentioned in Motorola Mobility’s 2010 annual filings filed with SEC []
  2. Google’s Motorola Bid Gets U.S. Approval, Bloomberg, February 13th, 2012 []