Google Closes Biggest Deal Yet: Buys Motorola Mobility

Google Inc. on Tuesday completed its $12.5 billion acquisition of phone maker Motorola Mobility Holdings Inc. and said it has appointed a Google executive as the new CEO of the business.

Dennis Woodside, previously president of Google’s Americas region, is Motorola’s new CEO. Departing CEO Sanjay Jha will help to ensure a smooth transition, Google said.

It is Google’s largest acquisition ever, and pushes it deeper into cellphones. Google is already a formidable force in mobile computing thanks to its Android software, the chief challenger to Apple Inc. and its iPhones.

At the same time, the acquisition is largely a defensive one. Google needs Motorola’s trove of 17,000 cellphone patents to defend Android phones against lawsuits by Apple, which accuses them of copying iPhone features.

As its line of smartphones has waned in popularity, Motorola Mobility has suffered losses totaling $1.7 billion during the past three years. Google has earned a total of $25 billion over the same stretch. The contrasting fortunes of the two companies is one reason why CEO Larry Page has decided to operate Motorola Mobility separately so it will be easier for investors to track how the different lines of business are faring.

Turning around Motorola Mobility also will require layoffs, a painful process that belies Google’s carefully cultivated image as a cuddly employer. Google laid off about 300 people after it paid $3.2 billion to acquire online advertising service DoubleClick Inc. in 2008, up until the biggest deal in the company’s history. The cutbacks represented about one-quarter of the workforce that Google inherited from DoubleClick. If Google imposes a similar reduction on Motorola Mobility’s 20,500-employee payroll, it would translate into about 5,000 layoffs.

Taking on so many new employees also raises the risk of culture clashes with the 33,000 people already working at Google.

Motorola Mobility is one half of the old Motorola Inc. It split at the beginning of last year. The other half, Motorola Solutions Inc., is still independent. It sells police radios, barcode scanners and other products aimed at government and corporate customers.

Google shares fell $5.69 to $608.41 in morning trading Tuesday. They are still near their 52-week high of $670.25 per share set in early January.