August 15, 2011, 11:16 AM

What does Google's acquisition of Motorola Mobility mean for retailers?

Merchants may need to take a second look at Windows Phone.

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Google Inc., the search engine kingpin that branched out into the mobile realm with its market-dominating  Android mobile operating system, will acquire Motorola Mobility Holdings Inc. for $40.00 per share in cash, or a total of about $12.5 billion. The transaction was unanimously approved by the boards of directors of both companies and is expected to close by the end of 2011 or early 2012.

Motorola Mobility’s stock closed trading Friday August 12 at $24.47. It soared today on news of the acquisition, closing at $38.12.

Motorola Mobility offers the popular Droid line of Android mobile phones. Motorola Mobility will remain a licensee of Android. Google will run the hardware maker as a separate business.

“Motorola Mobility’s total commitment to Android has created a natural fit for our two companies,” says Larry Page, CEO of Google. “Together we will create amazing user experiences that supercharge the entire Android ecosystem for the benefit of consumers, partners and developers.”

Andy Rubin, senior vice president of mobile at Google, adds that Android will remain an open source operating system, which means anyone can modify and use the software code. “Our vision for Android is unchanged and Google remains firmly committed to Android as an open platform,” he says. “We will continue to work with all of our valued Android partners to develop and distribute innovative Android-powered devices.” Despite Android’s open source roots, some critics say Google effectively controls the Android software that winds up on mobile handsets.

The acquisition could affect retailers developing mobile commerce apps because it almost certainly will help Microsoft Corp.’s Windows Phone 7 mobile operating system, says Avi Greengart, research director, consumer devices, at research and consulting firm Current Analysis. Retailers may need to pay more attention to Windows, he says.

“If Motorola benefits from being owned by Google, Motorola’s competitors will want to focus at least some of their attention on an alternative,” Greengart predicts. “The only commercially viable licensable mobile OS options right now are Android and Windows Phone 7.”

The acquisition will cause manufacturers like Samsung, LG and HTC that are deeply invested in the Android platform to re-evaluate their current strategy and consider making more Windows Phone products, says Charles Golvin, a principal analyst who specializes in mobile technology at Forrester Research Inc.

“Whatever changes in market share this acquisition triggers will take a lot of time to play out,” Golvin says, “so retailers have the luxury of sitting on the sidelines and observing before they need consider shifting resources from Android to Windows Phone.”

However, Golvin adds, some big brands might consider reaching out to Microsoft earlier if they think their brand’s presence on the platform would be a boon to the software giant. “Microsoft is looking for any edge it can find,” Golvin explains, “and might be willing to invest in marketing or promotion around a key retailer’s app.”

The acquisition, mobile experts say, goes beyond bolstering Android to protecting it. “It gives Google Motorola’s patents, which it clearly intends to use to provide an umbrella of protection over the entire Android ecosystem,” Greengart says.

In a Google blog post today, Page articulates this strategy, saying Motorola Mobility’s thousands of patents will help protect Google from “anti-competitive patent attacks on Android.”

“The U.S. Department of Justice had to intervene in the results of one recent patent auction,” Page writes. “Our acquisition of Motorola will increase competition by strengthening Google’s patent portfolio, which will enable us to better protect Android from anti-competitive threats from Microsoft, Apple and other companies.”

David Drummond, senior vice president and chief legal officer at Google, describes as anti-competitive actions by the CPTN consortium—which includes Microsoft and Apple—to buy the patents of software-maker Novell and by the Rockstar group—again including Microsoft and Apple—to purchase the patents of networking vendor Nortel.

“Patents were meant to encourage innovation, but lately they are being used as a weapon to stop it,” Drummond contends in a Google blog post.

Apple’s iOS mobile operating system, which runs on the iPhone, iPod Touch and iPad, is the chief competitor to Google’s Android. Apple did not respond to a request for comment.

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