Google lays out $12.5bn for Motorola Mobility

Search engine giant buys into tablet and phone hardware arena with biggest ever acquisition

Google has muscled its way into the smartphone and tablet hardware space with a blockbusting $12.5bn (£7.7bn) acquisition of Motorola Mobility.

The price paid by the search engine giant equates to a $40-per-share cash offer. This represents a premium of 63 per cent on Motorola Mobility's closing stock price on Friday.

Motorola spun out its business into two separate divisions earlier this year. The vendor's Solutions arm includes its enterprise IT technologies, while Mobility covers the manufacture and sale of mobile devices. These include the Xoom tablet PC.

The Xoom, and other Motorola platforms, run on Google's Android operating system, and the search engine giant claims its latest acquisition – which is its largest to date – will lead to fiercer competition in the market.

Larry Page, Google chief executive, said: "Motorola Mobility's total commitment to Android has created a natural fit for our two companies. Together, we will create amazing user experiences that supercharge the entire Android ecosystem for the benefit of consumers, partners and developers. I look forward to welcoming Motorolans to our family of Googlers."

A number of other big-name vendors run mobile devices on Android, including Acer, HTC, LG and Samsung. Market watchers will be keeping a close eye on how Google's relationships with these firms develop.

Sanjay Jha, chief executive of Motorola Mobility, said: "We have shared a productive partnership with Google to advance the Android platform, and now through this combination we will be able to do even more to innovate and deliver outstanding mobility solutions across our mobile devices and home businesses."