• by Laurie Sullivan  @lauriesullivan, August 15, 2011

Google is buying cellphone maker Motorola Mobility for $12.5 billion in cash. The deal will give the company the means to support the Android operating system through more than 16,000 patents and intellectual property and innovations. The move is Google's biggest acquisition to date.

"Motorola's total commitment to Android in mobile devices is one of many reasons that there is a natural fit between our two companies," Larry Page, Google CEO, wrote in a blog post. "Together, we will create amazing user experiences that supercharge the entire Android ecosystem for the benefit of consumers, partners and developers everywhere."

Global Equities research analyst Trip Chowdhry estimates that prior to this acquisition, Google owned about 520 patents related to Android, mostly in software. Motorola is one of nearly 40 manufacturers that build the Android operating system into its products. Only two other original equipment manufacturers will own more Android-related patents, according to Chowdhry, with Samsung at 36,674; and LG at 31,276.

"The brains, innovation and ideas all captured in the intellectual property make the difference," Chowdhry said. "This is an acquisition to make sure Google has the smartest people with the best ideas and a rich portfolio of patents. It is to protect Google's ecosystem."

Chowdhry said Google will likely allow Motorola Mobility to run on its own, enabling the company to move forward in mobile innovations through near field communications and Google Wallet for mobile devices.

Motorola holds 9.62% of the handset market, Chowdhry estimates. The company falls in line after Apple with 32.08%; Samsung, 15.22%; HTC, 10.69%; and Research In Motion, 10.62%.

Google will continue to struggle with smartphone market competitors. Nokia's share of shipments declined to 15.1% in the second quarter, down from 23.6%, sequentially -- allowing Apple to take the No. 1 position, according to market research firm iSuppli.

Apple only slightly outperformed the overall smartphone market, with its shipments rising by 9.1% sequentially. Samsung took the No. 2 spot, up from fourth place in Q1, as its shipments jumped by 55.6%. HTC posted the second-best performance among the top brands, with its shipments rising by 24.6%, compared to the first quarter, wrote iSuppli Analyst Tina Teng in a research note.

Last month, Motorola Mobility reported selling 440,000 units of the tablet Xoom, powered by Android, in the second quarter -- but at a net loss of $56 million for the company overall.

During a conference call with analysts in July, Motorola Mobility CFO Marc Rothman said Q3 sales should rise slightly sequentially. As Xoom sales continue to accelerate, he expects smartphone and tablet shipments for the year to fall somewhere between 21 million and 23 million. This year, however, tablet sales are slower than expected -- although the company beat analyst estimates of 300,000 for the latest quarter. At the time, Motorola Mobility estimates were to ship between 1.3 million and 1.5 million tablets in 2011, down from roughly 2 million.