14 DAY TRIAL // Google has announced its biggest acquisition to date, it wants to buy phone maker Motorola. It's also one of the company's boldest moves yet and a foray into unknown territory even for a company that has already spread its arms wide online and off.
While Google has its reasons for buying the phone maker, it gets its hands on 17,000 patents which will come in very handy in defending Android from patent hoarders, there are some big risks for the company, alienating its partners being one of the biggest.
But there are problems of a more practical nature as well, Google will be almost doubling its employee count and will now have to make a living in the cutthroat business of making consumer electronic devices. And it's spending a third of its available cash to do so.
Right of the bat, Google says that Motorola will remain independent, which makes sense considering its size. YouTube, for example, which is considerably smaller than Motorola in terms of revenue, employees and so on, runs as an independent unit inside Google.
Google had close to 29,000 employees at the end of the second quarter of 2011. The company plans to add several more thousands by the year's end.
That said, Motorola Mobility, has about 19,000 of its own. There's no way of integrating the two work forces, with different corporate structures and mentalities, not to mention different backgrounds, in a seamless manner.
Google is not even trying to do that, Motorola will continue to operate as is, under the leadership of Sanjay Jha. The company has been undergoing a restructuring and will probably continue to do so, to reach profitability under Google ownership.
For the time being though, Motorola is going to continue to lose money and Google will have to support it. Already, it plans to spend $12.5 billion of its $40 billion in cash for Motorola.
Google has plenty of cash left and it's making more each quarter, but it is spending more than it's likely to make in profit this year on Motorola. Google had a net income of about $2.5 billion last quarter. And if the deal fails to go through, Motorola gets $2.5 billion from Google for the trouble.