This morning we heard that Google has decided to pay a hefty $12.5B to acquire Motorola Mobile, the group that separated from parent Motorola under the leadership of Sanjay Jha. Google is paying quite a premium of 40% for this. Now what does this mean?

Henry Blodget in his Business Insider article thinks this might be a disaster for Google. Android is the key motivation here. Motorola endorsed Android early and their android-based phone was the second most in market share at 29%. HTC has the highest share at 35% and Samsung is number 3 at 25%. Google was supposed to be the neutral supplier of the operating system to all these hardware manufacturers. Now with its acquisition of the second largest player, the others will see a channel conflict and if Motorola gains market share, they will be more upset. Of course Google continues to emphasize its vendor neutrality statements and claims the reason for the acquisition is to own Motorola’s patents.

Some experts think this is a brilliant move by Google to finally deliver an integrated mobile device with Android to the market, to compete with Apple’s iPhone. But it is doubtful the Motorola hardware can compete with Apple’s slick design.

Another set of believers think this may drive some other phone manufacturers like Nokia, RIM to Microsoft’s fold. Time will tell how this move by Google (largest acquisition in their history) will help Google’s future growth. One thing it does immediately is to add 19000 employees to Google’s 42000 current payroll ( a hefty $95M cost per year). Would the cultures match? The hardware part seems so outside the core of Google!

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