As pointed out in a piece I wrote August 12 on ecosystem wars —Amazon (Cloud Player) and Google (Social Gaming) — not a day goes passes without significant news in this arena, and today was certainly no exception.  Google CEO Larry Page (News - Alert) issued a message on the company blog about Google’s blockbuster move to acquire Motorola Mobility for $12.5 billion. It was up and briefing analysts an hour before the opening bell on Wall Street (5:30AM PDT) this morning.

This is a big deal both from a dollar perspective and because of the impact it is likely to have.

Money makes the world go round 

Here is the tale of the tape in case you missed our earlier item:

• $12.5 billion in cash
• An offer price of $40 a share, which is a 63% premium
• Google expects to complete the transaction, approved by both boards, by early 2012
• A reverse breakup fee of $2.5 billion in cash because of regulatory problems

While Google boasts it has a track record of making acquisitions work, this is their biggest deal to date:

• DoubleClick, $3.1 billion, March 2008
• YouTube (News - Alert), $1.56 billion, November 2006
• dMarc Broadcasting, $1.23 billion, Feb. 2006
• AOL (investment), $1 billion, August 2006
• ITA Software, $700 million, April 2011

With Google stressing that it will keep Motorola Mobility as a separate subsidiary in order to keep the Android ecosystem “open” and in theory not upsetting what will now be Android-based handset rivals HTC, Smasung and LG, how it actually digests this acquisition if it is approved will be fascinating.

There are certainly a lot of moving parts to consider. One of particular interest is working with Microsoft, whose feet are in lots of camps with its Android licensing money rolling in while troubled Nokia seeks market redemption via Windows 7 Phone (News - Alert).

What’s it is worth 

Let’s not forget that Microsoft was part of the consortium (which included Apple, EMC, Ericsson, Research In Motion and Sony) that just paid $4.5 billion for 6,000 Nortel patents. Google, who originally offered $900 million for the Nortel patents and just paid IBM an undisclosed amount for 1,000 patents, is getting roughly 17,000 for the Motorola patents that come with the deal. This raises an interesting question as to valuations not just of patents in an age where investing in protected intellectual property has a premium over investing in organic innovation, but also about the value of so-called patent “trolls” like Interdigital.  For Google, watching the iPad and iPhone (News - Alert) seemingly taking over the smartphone/tablet world and threatening the entire Android ecosystem, this was, in reality, a move they had to make, despite the partnership challenges.  It is a case where, like the lottery, they have to be in it to win it.

Initial reaction from most quarters -- including from ecosystem partners who are now potential rivals --has been positive. This is not unexpected given the pull through and protection they will get from having a viable Android out there with a massive developer community that will be less jittery-- or will they be? Financial analysts are also saying that the strategic fit is good on other fronts, since Google is very interested in the home automation market and Motorola gives them a nice piece of that puzzle on several scores.

Crossfire Media co-founder Carl Ford points out the following:

• This maybe the most expensive patent defense that we have seen, which indicates that there is some vulnerability in the decisions made by Google’s VP of Mobile, Andy Rubin.
• Activist investor Carl Icahn, who has been pressing Motorola to do something big to increase shareholder value should be given a hero’s welcome at the next stockholders meeting.
• This really does confuse the issue of Hardware OS vs. HTML5 to the extreme. Google is displaying schizophrenia in propping up Android and, while the waters seem calm at the moment, could be destroying the other partnerships.
• HP may find itself with an opportunity to spin out their Palm acquisition at a premium or put a new open source consortium together.
• When Google sold phones directly, it failed miserably, and it is not clear what Motorola Mobility brings to the table to solve these problems. Google is certainly now going to have to invest heavily in servicing its entire food chain.

Carl also asks the following, which is food for thought: “Can we look at Oracle's acquisition of Sun Microsystems as a guide?”  

It is only Monday

It is important to remember it is only Monday. As last week proved, ecosystem wars have skirmishes that seem to break out continuously and can happen almost anywhere in the world and in almost any venue on any outlet — the courts, Twitter (now favorite battleground), regulatory bodies globally (banning the sale of Samsung tablets for instance), blogs, etc.

One thing is for certain, when it comes to the ecosystem wars, these are far from the dog days of summer. Please check back with us, “as the world turns.” 

Peter Bernstein is a technology industry veteran, having worked in multiple capacities with several of the industry's biggest brands, including Avaya, Alcatel-Lucent (News - Alert), Telcordia, HP, Siemens, Nortel, France Telecom, and others, and having served on the Advisory Boards of 15 technology startups. To read more of Peter's work, please visit his columnist page.