There is growing speculation that Google (NASDAQ:GOOG) may be replacing Motorola Mobility’s (NYSE:MMI) current CEO Sanjay Jha with its own executive.  The rumor may just be the first of many changes Google is considering once its $12.5 billion acquisition officially closes. The biggest concern continues to be Android’s partnership with numerous OEMs like Samsung and HTC, and we expect them to be cautious despite Google’s assurance that Motorola will be run as a separate entity.
Investors May See Motorola as a Burden
The 17,000+ patents notwithstanding, Motorola Mobility’s addition to Google’s financials would drastically impact the company’s overall revenue and margin outlook for the future. Compared to Google’s $38 billion gross revenue and 42% EBITDA margins in 2011, Motorola’s 2011 revenues stood at around $13 billion, along with a reported operating loss for the year.  Despite Google trying to shuffle around its leadership, it’s going to take some time before it finds the right in-house team to manage a markedly different low-margin business. And concerns among other Android partners are bound to persist over a potential conflict of interest, even if they publicly don’t express the same.
We currently have a price estimate of near $627 for Google’s stock, which is roughly 4% above the current market price. We will incorporate the impact of Motorola Mobility’s acquisition in our analysis once the deal is formally closed.Notes: