The U.S. Department of Justice has endorsed Google's decision to sell the Motorola Home set-top business to Arris Group for $2.35 billion. This was the last regulatory hurdle that the deal faced, and now the broadband technology provider expects to close the deal by Wednesday. Arris Group is expected to use this tuck-in acquisition to improve the networking equipment it offers to cable providers.
When Google inherited Motorola Mobility for $12.5 billion last year, Google was more interested in Motorola's mobile business and wasn't eager to invest in the set-top box business, especially since it didn't appear to offer much to Google's TV initiative. The deal will transfer 7,000 Google employees to Arris's employment, as well as a series of patent infringement lawsuits with TiVo, related to digital video recorders that Arris's CEO Bob Stanzione has expected to result in damages of billions of dollars.
During negotiations, Google offered to cap any liability Arris might face in the event Motorola Home is found to violate any patents owned by TiVo. Under the terms of the deal, Google will receive $2.05 billion in cash and $300 million in newly issues stock, giving it at 15.7% ownership stake in Arris upon the deal's closure. The deal will also allow Arris to license a number of Motorola Mobility patents.
Hmm, I didn't know about that acquisition. It's interesting that 7000 Google/Motorola employees will be transferred to Arris, especially since Google has about 50,000 employees currently. 14% of its employees seems like quite a lot!
ReplyDeleteVery interesting article about this situation with Google and Arris. I do agree with Gauam that that many employees seem like a lot. Hopefully we get to discuss about this topic tomorrow in class and get Professor Lavian to tell us his thoughts on the subject. We should definitely look at the outcomes of this acquisition in the future.
ReplyDeleteI didn't know about this either, but it is indeed interesting. One thing I have discussed in my blogs is that Google's purchase of Motorola is questionable and 12.5 billion dollars is a big investment, but it's good for Google that they could sell some of their purchase and still get $2.35 billion for it.
ReplyDeleteThis article almost makes me want to invest in patents haha. I wonder what the average return on a patent is. Obviously a high level of expertise is required, but nonetheless it seems extremely lucrative.
ReplyDeleteI understand how Google decided to sell part of Motorola because it is not part of Google's business strategy. I believe selling set-top box business brings in great return on investment to Google. It is really interesting to watch the dynamics of M&A in tech.
ReplyDelete@Guatam, I agree that 7,000 employees seems like a lot. I wonder if this employment transfer is actually going to happen. Will these employees simply be working for a new company? Will they be terminated by Google and have to find new jobs? I'm curious to learn more about the employment process when certain tuck-in acquisitions are made.
ReplyDelete@Noah, Despite Google having questionable thoughts about their initial purchase, the fact that they are able to still sell pieces of their acquisition that are not relevant is a positive for them. That being said, they are still fronting the cost of liabilities regarding any patent litigation affiliated with that sale. So overall, Google deals with a lot more processing fees and headache as a result of such a questionable purchase in the first place.
ReplyDelete@Yulia, although you're right that Google might be getting a return on investment by selling set-box top, it is important to consider the negative externalities that might be associated with that sale. In other words, the fact that Google offered to cap any liabilities Arris might face in the event Motorola Home infringes any patents, migh be an indicator that Google simply wanted to get rid of the set-box top by any means necessary, even if their bargaining power was diluted in the process.
ReplyDeleteIf the company has the money to afford it, it may be a safer long term investment to buying and keeping only what it needs. I wonder if a company can acquire a patent then modify it so that even after it sells it, the company wouldn't have anything to lose.
ReplyDeleteI think that this move by Google was a smart move. The set-box top division of Motorola did not have any synergies with Google's core internet and mobile business, and the patents that Google was interested in have all been retained by Google. Additionally, by selling this division Google was able to generate liquid cash that it could use on other projects, as opposed to retaining an asset that was not in line with its core business operations, required management and oversight, and would not likely contribute to Google's position as an industry leader.
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