Did Google Get a Buy One, Get One Free Deal on Motorola? Shareholder and Analytics Firm Seem to Think So


If someone were to tell you Google overpaid for Motorola Mobility, you’d probably scoff and say “$12.5 billion ain’t chump change.” Yea, it looks pretty damn expensive to those of us on the outside looking in.

But one Motorola Mobility shareholder – one John W. Keating – is not pleased with the deal at all as he believes Google undervalued Motorola, directly affecting him as a shareholder. His argument is that Motorola has way more to offer than patents and that’s all Google is paying for.

And, if you thought he was just blowing smoke, he may be somewhat right. With some very rudimentary mathematics and logic, analytical firm Frost & Sullivan deduced that Google paid Motorola for the cost of the patents only, and everything to come along with it was a free cherry on the top. Take a look at their reasoning below:

Motorola has a portfolio of 24,500 patents and patent applications that instantly bolsters Google’s strength in the IP war. Looking at some recent patent auctions and using some simple math can show why these patents were indeed the target of Google’s acquisition.

Using one of the industries recent patent auctions as a baseline, in December of 2010, Novell sold off its portfolio of 882 patents for $450 Million. A simple division calculation leads us to a value of $510,204.08 per patent. Why not round that figure off you ask?

Well, let’s look at the patent value of the Motorola acquisition.Forgetting that Motorola also makes mobile phones, let’s say the entire value of the acquisition was in their 24,500 patents and applications. At a $12.5 billion price tag, that equates to…drum roll please…$510,204.08 per patent. Can anyone guess what heuristic they used in the board room in valuing the deal?

In the Motorola acquisition, Google bought a patent portfolio and got a mobile phone business thrown in for free.

Furthermore, our friends at Android&Me point out that the cost of the Nortel patents for the consortium were about $750,000 per patent (if we’re assuming each patent holds equal value), meaning Google walked away with a nice bit of pocket change on the patents they just acquired alone. However, we can’t forget to note that the consortium likely divided the cost amongst members so it was much lower for each individual party.

So Google not only gets the patents they wanted at a very extreme premium, but all of the goods to go along with Motorola beyond that, again assuming each and every patent is valued the same (which they most probably aren’t). We’d say they made away nice, but we’re not sure if Mr. Keating’s lawsuit will do anything to change Google’s proposal unless the FTC and the Department of Justice strongly agree. The real question here is how will Sanjay Jha feel when he finds out they probably could have squeezed Google for a lot more? [ZDNet]

Quentyn Kennemer
The "Google Phone" sounded too awesome to pass up, so I bought a G1. The rest is history. And yes, I know my name isn't Wilson.

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  1. The patents are being over-valued much like Gold these days. Many of the patents probably would never make any money. The broken patent system and the patent trolls are artificially driving up the cost of patents. It is the consumer who suffers.

    1. Patents making money …. so last century! They don’t make money directly anymore: now they make money indirectly by slowing down competition so you can sell products uncontested. Just ask Apple!

      You don’t need to even be right; you just need to have a grounds to sue and go to court …. by the time he’s found innocent a year will have passed and you’ll already own the market he’s trying to get into.

      With millions of patents in the system “everything has been invented”. Its no longer about protecting ideas, rather it’s about protecting yourself from being stalemated or possibly stalemating others (read Galaxy vs ipad).

  2. If Moto’s patents are worth so much, they sure haven’t staved off any lawsuits. Microsoft sued them just as they did HTC. Apple sued them.

    Counting patents is a stupid way to estimate their value. Only a few of them will ever be of much value.

    If anyone actually thinks that a 40% premium on the stock price for a company loosing money is over valued, they’re wrong.

    1. Patent suit among the giants are usually the result of the parties not being able to come to an agreement on cross licensing. No one company holds all the patents that are in play in the mobile arena. They have to cross patent with each other. And if that is the case between Apple, MS and MOTO….the law suits are the normal process for pushing a resolution. None of the giants want to get to far out on a limb without good cross licensing agreements. The cost and pressure of going to court for real….usually greases the wheels of compromise.

    2. patents are some of their assets, which is a way to value a company, according to Wikipedia their total assets are US$ 6.204 billion

  3. Just dividing the price by the total number of patents and patent applications, and then comparing it to another patent value ratio is a really crude way to determine if Google got a good deal. Moreover, a patent application isn’t the same and isn’t worth the same as a patent. I assume Google’s lawyers went over each and every one of these patents, and that Google thinks this is a good deal, but patents can vary wildly in value. The patent on viagra, for instance, is worth a lot more than the patent on the Chia Pet (which is actually probably worth a huge amount of money! But it’s the principle of the thing!).

    1. agreed, not all of the 24k patents are usefull for either motorola or google; both moto and google made out decently with an edge to motorola’s side. If i were a moto shareholder, I would be ecstatic if the deal goes through

  4. LOL these ass clowns just don’t get it. Like fred said, if you’re losing money and you get offered a premium chunk of change on top of the stock price, take it! Publicly traded companies are based on stock performance not fairy tails about how much patent portfolios could be worth. Not to mention the fact that the idiot suing has no basis given IT WAS APPROVED BY MOTOROLA’S BOARD. Nuff said go home court troll.

    1. I’m sure that in his head, he is wishing that there was a bidding war.. and perhaps that might have increased the price some.. However, if you also look at it from a point of view of an employee who cares about your business and not “just a share holder”,.. then who buys your business impacts the future of the company you work for.. I’m sure the thoughts crossed their mind, of being bought for an over inflated price for their patents, and then the “business’ dismantled and thrown away.. The Google deal probably looked sweet, as they couldn’t imagine that scenario happening as easily with them.. I bet it would be extremely difficult or near impossible to find a Motorola employee, who would side with him in finding someone else to buy them.

  5. how will they know which patents help? how do you keep track of 24,500?

    1. You file them. And when you want to sue somebody, you get a worker to search through all those patents until you find some that could possibly be infringed. hence what MS did.

      1. all 24,500 of them?

        1. Yes. That’s exactly what Ms did and what Apple is doing. They just search through their patent list and find some that could be infringed upon. Something like that obviously creates office jobs. LoL!! I think they’re called bookkeepers.

    2. Get that kid from Suits to go through all the details and tie your competition up in courts, put injunctions on the sales of their products, and do what ever you can to turn crApple into rotten tomatoes.

  6. While the numbers seem to work out in an interesting fashion, I’m not sure I agree with Mr Keating. Prior to the news about the purchase, Motorola Mobility (NYSE:MMI) was trading at ~$25 a share with a total market cap of $7.42 billion. Additionally the company has been running at a loss (~$100 million over the past 6 months). When Google announced they would purchase MMI, the share price rose to ~$38 (market cap of $11.32 billion), meaning Mr Keating got an immediate 62% increase on his shares. Seems like he should be happy and not complaining for more.

  7. Shareholders feel they should have gotten more money? STOP THE PRESS!

  8. well google paid more than moto was worth on the stock market so they should be happy

  9. Something tells me that most share holders would like Mr. Keating to STFU.

  10. When it comes to finances, never trust a man named Keating.

  11. That doesn’t really apply. Each one of Motorola’s 24,500 patents can’t possibly be worth that amount.

  12. This is a win win for both companies. Motorola is nothing without google.Motorola cant go back to making windows phones ans make money at it either. I assume Motorola is losing money on the phone side of the business so they figure why not make money on the patents side. What happens if google get sewed by apple then they loose money in fees playiny the apple game. Hum why not become a mobile phone maker hey Motorola is for sale! We should buy them

    1. sewed? I’m sorry, but that HAD to be pointed out.

  13. What’s the problem with that?

  14. You get me the products, I’ll give you an extra $5 each, and you ship ’em to me. Sound good?

  15. why is this site TRYING to make thing sound bad now. this is 1 persons negative opinion and its being posted on the front page of 1 of the most popular android sites out there.. articles have been getting worse and worse.
    moto’s stock rose ~56% to an all time high for moto mobility and google has turned almost everything it’s touched into gold.
    idk what this guy’s for-real-beef is or this site but its not whats written in the article and the editor isnt “just posting facts.”
    im just about done using this site.

  16. This guy was probably put up to this by Apple – I can’t stand patent trolls!

  17. Keating must be greedy beyond belief, and is probably a plant by Microsoft or Apple

  18. I’m not sure that I agree with the logic that one patent is equal to another and by simply dividing the total cost by the total number of patents would appear to be a flawed way of looking at things. I’m fairly certain that Motorola has patents that are worth more than say a patent for ShamWow!

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