Google Pays a Princely Premium for Motorola’s Patents

by Trefis Team
-45.70%
Downside
38.97
Market
21.16
Trefis
MMI
Motorola Mobility
Rate   |   votes   |   Share

Google (NASDAQ:GOOG) announced its acquisition of Motorola Mobility (NYSE:MMI) for $12.5 billion at a whopping premium of 63% above its Friday market close price. We have a $21.15 price estimate for Motorola Mobility stock, which is now about 45% below the market price. Although at first glance this purchase seems very expensive and so a negative to Google, we believe 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]

A few weeks back, Google lost out on Nortel’s patents and the consortium of Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT), Research in Motion (NASDAQ:RIMM), EMC (NYSE:EMC), Sony and Ericsson bought it for $4.5 billion. [2] Nortel had only 6,000 patents, which means the acquisition price for Motorola could be justified solely from its 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. See these recent notes from us Patent Wars Heat up as Google Courts InterDigital and Are Cheap Google-Motorola Smartphones on the Way?

See our complete analysis for Motorola Mobility stock here

Notes:
  1. Number of patents information mentioned in Motorola Mobility’s 2010 annual filings filed with SEC []
  2. Apple Joins Microsoft, RIM in $4.5 Billion Buy of Nortel Patents, Bloomberg, July 1st, 2011 []
Rate   |   votes   |   Share

Comments

Name (Required)
Email (Required, but never displayed)
Be the first to comment!