Cable Operators

Google Only Wanted Moto Patents

9/19/2011 12:01 AM Eastern

Google’s $12.5 billion bid for Motorola
Mobility came together in only about five weeks — and was $3
billion higher than its first offer — but originally, the Internet giant
wanted to buy only the company’s mobile patent portfolio.

In early July, Google approached Motorola
Mobility about purchasing a chunk of its
patent portfolio, according to a preliminary
proxy statement Motorola Mobility filed last
week. But Motorola Mobility CEO Sanjay Jha
told the Internet giant it could be “problematic”
for the company if it sold off a large portion
of its intellectual property.

The details of how the deal came to fruition
show Google was so desperate to beef
up its patent holdings that it not only agreed
to buy the entire company but also to pay
a 33% premium over what it first offered.
However, the disclosure also casts additional
uncertainty about what Google intends
to do with the mobile devices and cable settop
businesses, since those aren’t the pieces of the company
it was actually interested in owning.

Google was concerned that its Android operating system or
partners using the software would be the target of patent litigation
by rivals, after a consortium including Apple, Microsoft
and Research In Motion teamed up to buy Nortel Networks’
6,000 patents for $4.5 billion.

The Googlers were eager to obtain their own intellectualproperty
war chest. After the Nortel deal, Andrew Rubin,
Google’s senior vice president of mobile, contacted Jha “to request
a meeting to discuss the purchase by some of Google’s
competitors of the patent portfolio of Nortel Networks Corporation
and its subsidiaries … and the possible impact of and
potential responses to the purchase.”

In a subsequent meeting, Jha told Google executives that “it
could be problematic for Motorola Mobility to continue as a
standalone entity if it sold a large portion of its patent portfolio.”

On July 28, 2011, Jha discussed Google’s
potential acquisition of Motorola Mobility
with David Drummond, Google’s senior
vice president of corporate development
and chief legal officer. Google executives
indicated that they were preliminarily considering
a per-share price range in the “high
$20s or low $30s,” according to the filing.

Google sent a letter Aug. 1 to the Motorola
Mobility board proposing an acquisition by
Google for $30 in cash per share. The board
rejected the bid and suggested Google increase
its proposed price to $43.50 per share.

On the morning of Aug. 15, Motorola
Mobility and Google fi nalized the merger
agreement at $40 per share in cash.

The deal includes an unusually high breakup fee. Google
would pay Motorola Mobility $2.5 billion if it terminates their
merger agreement.

September