M&A Deals of the Year
Introduction   Apple and partners-Nortel   Google and Motorola Mobility   Access Industries -Warner Music   Cumulus Media-Citadel   Comcast-NBC Universal   H&R Block-TaxAct   Caterpillar-Bucyrus   Ares and CPPIB-99 Cents Only Stores   Grupo Bimbo-Sara Lee baking assets   BHP Billiton-Petrohawk   Peabody Energy-Macarthur Coal   Selling off Bank of America   Dish Network-Blockbuster   Amgen-BioVex   KKR et al.-Samson Investment   Pearson-Connections Education   Alleghany-Transatlantic   Breaking up Dexia

When Google Inc. co-founder Larry Page a year ago was tapped to take the reins of the online search and advertising giant, it was a clear sign that the company, well known for its playful startup mentality, was ready to grow up a little bit. e_SPar With Page as CEO, the company streamlined its decision-making structure in an attempt to stave off the bureaucratic bloat that has sunk many other large tech companies and boost its speed and aggressiveness as it faces growing competition on multiple fronts.

"Larry has really re-energized the Google troops," says Susquehanna Financial Group LLLP analyst Herman Leung. "Instead of relying on what they have created over the past couple of years, people are feeling like Google is going on the offensive and focusing on where it can win."

It didn't take long for the Mountain View, Calif.-based company to fire the first salvo. Four months after Page officially took the reins, Google unveiled the priciest acquisition in its 13-year history: the $12.5 billion purchase of cellphone maker Motorola Mobility Holdings Inc.

The deal, which still awaits regulatory approval, marks an aggressive and risky move by a company looking to shed its image as a giant but quirky technology petri dish fueled by the $30 billion it earns in annual ad revenue, and to take charge in a market that holds the future of searches and ubiquitous data access in its thumb-tapping hands.

Certainly, there is defensive element to the acquisition, which is Google's largest by far. The company made no bones about the fact that talks with Motorola were sparked by the $4.5 billion purchase by Apple Inc. and a consortium of tech buyers of mobile patents from Nortel Networks Corp. in July (see story on facing page). Google had placed an initial $900 million bid for the patents in April.

After all, Google, despite its success, is still a young company without the wealth of patents held by Apple or Microsoft Corp. The very popular mobile operating system it offers, itself gained via the tiny acquisition in 2005 of Android Inc., has opened up Google and its handset partners to potential lawsuits that claim the free, open-source system unfairly uses technology developed by others.

Motorola's 17,000 existing and 7,500 pending patents are a key way to ward off this litigation. "It's become an arms race where companies like Google or Apple want it to be as expensive and painful as possible to litigate against them," says Morningstar Inc. analyst Rick Summer.

Of course, along with Motorola's patents comes a smartphone manufacturing operation. The notion that the caretaker of Android, the operating system for dozens of handset makers, will make phones of its own became a concern in the industry the day the deal was announced. Besides, it's novel for Google to start making hardware, but another thing entirely for it to become a smartphone maker. The market is unique in its competitiveness, the difficulty in remaining a leader and the speed at which market dynamics change.

"Many big companies have failed in the handset business, which is an industry where things switch on a dime, and there's never a steady state," says In-Stat LLC analyst Allen Nogee. "On top of that, this is the first time Google has really deviated from their expertise."

This has led many to predict -- and advocate -- the eventual sale or spinoff of the handset business. Whether or not Google decides to retain Motorola's handset business, there is no doubt the strategic push that drove the Motorola acquisition is far from done. Google continues to build its defensive patent trove; it recently confirmed the acquisition of 1,023 patents from IBM Corp. Similar deals will continue, Leung predicts.

"Whatever Google's identity going forward -- as a hardware or software company -- it realizes that mobile is key," he says. "With the Motorola deal, they have put themselves in a strong position in that market for the next five to 10 years at least."