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Google is promoting synergy (like a boss).  (Source: NBC)
Surprisingly, Google says that cash and "goodwill" were also big drivers

Google Inc. (GOOGsurprised the tech world last year with its decision to scoop up struggling veteran devicemaker Motorola Mobility, Inc. -- one of the "big three" of the Android world.  Some figured that Motorola's "war chest" of over 17,000 patents amounted to nearly the entire $12.5B USD valuation Google made in its successful purchase bid.

Traditionally, Google did not look to patent its software innovation at the same pace as rivals Apple, Inc. (AAPL).  With a lawsuit from Oracle Corp. (ORCL) directly targeting Google and with Apple turning up the lawsuit pressure on OEMs, many felt Google needed to buy the patents to defend itself and its partners.

But in newly released regulatory filings Google says the patents represented less than half the valuation.

Google's breakdown of Motorola's worth is as follows:
  • Patents:     $5.5B USD 
  • Cash:         $2.9B USD
  • Goodwill:   $2.6B USD
  • Customers:   $730M USD
  • Other:           $670M USD
For those curious what exactly Google means by "goodwill", the company elaborates slightly that it is "primarily attributed to the synergies expected to arise after the acquisition."

However, Google has left just about everyone in the dark as to exactly what those "synergies" might be.  During its earnings call, it did not discuss its long-term strategy or plan for Motorola.

Google completed the acquisition in May, after Chinese regulators finally stopped dragging their heels on approval.   U.S. and European antitrust regulators approved the acquisition months before.

One thing is for sure; whatever Google's secret "synergies" may be, they have yet to take hold.  Motorola Mobility made $1.25B USD in revenue in the second calendar quarter, but lost $233M USD, once operating expenses were taken into account.  Google still managed to earn $2.79B USD, though, despite that hardship.

Source: WSJ



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Really?
By mcnabney on 7/25/2012 4:40:25 PM , Rating: 2
Goodwill is an economic term to define the value of a company that is intangible/exchangeable. Essentially the company's good name and the public's willingness to purchase their products. Mathematically, the difference between the value of all company assets and the market cap / purchase price.

In other words, Google paid the goodwill value for the Motorola name.




RE: Really?
By JasonMick (blog) on 7/25/2012 4:53:57 PM , Rating: 2
quote:
Goodwill is an economic term to define the value of a company that is intangible/exchangeable. Essentially the company's good name and the public's willingness to purchase their products. Mathematically, the difference between the value of all company assets and the market cap / purchase price.
Typically, yes. But in its filing Google explicitly cited an elevated "goodwill" valuation due to synergies, hence the article text.

My point was that it spoke to synergies (aka increased sales), but didn't explain where they might come from or how.


RE: Really?
By rubbahbandman on 7/25/2012 5:48:38 PM , Rating: 2
Here is Google's revised calculation for valuing Motorola.

Patents + Goodwill = Actual Patent Value


RE: Really?
By Jedi2155 on 7/26/2012 4:17:26 AM , Rating: 2
The increase synergies/goodwill value probably come from Google's own name.


RE: Really?
By BifurcatedBoat on 7/26/2012 4:58:23 PM , Rating: 2
I think the synergy is about the fact that as a consumer, you trust Motorola's capability to make quality phones. You trust Google's ability to make quality software. You might not trust either company to be able to do both well - at least initially - on their own.

With the acquisition however, I think the expectation is that their Nexus offerings will be able to be even better through tighter integration.


RE: Really?
By WalksTheWalk on 7/25/2012 5:01:09 PM , Rating: 2
In other words, Google paid a 2.6B premium over and above Motorola's value on paper.


RE: Really?
By Argon18 on 7/25/2012 5:14:37 PM , Rating: 3
Wrong. It's a retail store with previously-owned clothing and home furnishings for affordable prices.


RE: Really?
By zephyrprime on 7/26/2012 11:57:07 AM , Rating: 2
I really doubt that Google gives a rat's ass about the Motorola name and I don't think they are even going to keep the Motorola brand around. There's more to good will that just good name. The goodwill value of Motorola is their business capacity to design and manufacture phones and tablets. The assembly lines are just commodity machines and are only worth so much but the human capital and organizational value of a working company that can design and build whatever is what makes any company valuable.


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