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Motorola & Google

Google will acquire Motorola Mobility Holdings, in a surprise move that for the first time puts the company squarely in the smartphone hardware business.

“The combination of Google and Motorola will not only supercharge Android, but will also enhance competition and offer consumers accelerating innovation, greater choice, and wonderful user experiences,” Google CEO Larry Page wrote in a post on the company’s official blog.

Google will acquire Motorola for approximately $40 per share in cash, or around $12.5 billion dollars, “a premium of 63% to the closing price of Motorola Mobility shares on Friday, August 12, 2011,” according to Google’s press release.

“This transaction offers significant value for Motorola Mobility’s stockholders and provides compelling new opportunities for our employees, customers, and partners around the world,” Motorola Mobility CEO Sanjay Jha said in a statement.

Over the past three years, the smartphone arms race between a handful of companies has been cutthroat. Research in Motion (RIM), once the dominant player in the handset space, has been bleeding share since the introduction of Apple’s iPhone and the Android operating system. A dwindling Palm was acquired by Hewlett-Packard in 2010, hoping the backing of a massive company will help its handsets and operating system gain share in the competitive space. And of course since Google and Apple entered the ring in 2007 and ‘08, respectively, nothing has been the same since.

But this is a landmark moment for Google, a company which has not had a part in owning any of the hardware on which its operating system runs thus far. Apple, RIM and HP, by contrast, all own both the software and hardware aspects of their respective product offerings.

Google and Motorola have a history of working together since Android debuted in 2008. While HTC was the first manufacturer to produce an actual device for Google’s mobile platform, Motorola’s 2009 Droid release was the first true Android handset to stack up against competitors in the smartphone wars. Over a quarter of a million Droid handsets sold in the first week of the phone’s release, according to analyst estimates.

Interesting times ahead for the smartphone market!

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