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Google’s Acquisition of Motorola Mobility and Motorola Solutions

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Google’s Acquisition of Motorola Mobility and Motorola Solutions

Lenovo’s Acquisition of Motorola Mobility from Google

Google’s Acquisition of Motorola Mobility and Motorola Solutions

1. Details of the Company Acquired

On August 15, 2011, Google announced that it would acquire 100% of Motorola’s shares at a price of $40 per share for a total consideration of $12.4 billion USD, which gave Google 100% control over both Motorola’s Mobile business and Home business. This transaction also included all vested Motorola stock options and restricted stock units (Google, 2012). The acquisition was settled on May 22, 2012 after receiving approval from the United States Department of Justice (Google, 2012). Google paid the acquisition price all in cash. Through this acquisition, Google gained the rights to use Motorola’s 17,000 registered patents and more than 7,500 pending patents (The Washington Post).

2. Allocation of Acquisition Differential

2.1 Amount of Acquisition Differential

The attached financial statement shows Motorola’s consolidated balance sheet for the fiscal year end December 31, 2012. Motorola recorded total assets of $12,679 million USD and total liabilities of $9,389 million USD (total current liabilities of $3,335 USD, total long-term liabilities of $1,859 USD, and total other liabilities of $4,195 USD). Therefore, the net assets of Motorola as of December 31, 2012 were $3,290 USD. The difference between Google’s $12.4 billion consideration and Motorola’s book value of net assets is the acquisition differential, which is $9,210 million USD. This calculation is summarized as follows:

Cost of 100% Ownership

$  12,400

Book Value of Motorola’s Net Assets

      Assets

$  12,679

      Liabilities

(9,389)

3,290

Acquisition Differential

$  9,110

(USD in millions)

2.2 Allocation of Acquisition Differential

Motorola did not include its fair market values of assets and liabilities in the 2012 annual report nor did it disclose the values on its website.

However, Google disclosed in its Q2 2012 report that of the $12.4 billion USD total purchase price, $2.9 billion was cash acquired, $5.5 billion USD was attributed to patents and developed technology, $2.6 billion USD to goodwill, $730 million USD to customer relationships, and $670 million USD to other net assets acquired (Google Form 10-Q, 2012). Based on the preceding information, the allocation of acquisition differential can be calculated as follows:

Cost of 100% Ownership

$  12,400

Acquisition Differential

9,110

      Allocated

(FV – BV)

          Patents & Developed Technology (Note 1)

+ 4,338

          Other Net Assets (Note 2)

+ 2,172

6,510

      Goodwill (Disclosed by Google)

$  2,600

(USD in millions)

Note 1      As of June 30, 2012, Motorola recorded its total carrying amount of intangible asset to be $1,162 USD. Detailed information is in attached financial statement.

Note 2      Other net assets are calculated by subtracting acquisition differential ($9,110) by patents & developed technology ($4,338) and goodwill ($2,600). Detailed allocation cannot be calculated.  Neither Motorola nor Google disclosed Motorola’s fair market value of inventory, property, plant, equipment, or liabilities.

2.3 Amortization of Acquisition Differential

Goodwill      In 2012, Google adopted new accounting standards update required by FASB regarding the test of goodwill impairment, which states that if a company beliefs that the fair market of goodwill is more-like-than-not more than its carrying amount, further impairment test is not required for the fiscal year (Deloitte, 2012). Since Google tests its goodwill for impairment at least annually or more frequently if the occurrence of certain events indicate that goodwill may be impaired (Google, 2012), this adoption did not have material impact on the financial statements. The impairment tests in both 2012 and subsequent years concluded that there was no goodwill impairment in any of these years (Google, 2012).

Patents and Developed Technology      Google disclosed that patent and developed technology have a weighted-average useful life of 9.0 years; the amortization schedule is therefore can be calculated as follows:

Balance

Dec. 31, 2012

Year 2013

Year 2014

Balance

Dec. 31, 2014

Patents & Developed Technology

$  4,338

482

482

$  3,374

(USD in millions)

Other Net Assets      The amortization schedule for other net assets cannot be calculated because detailed information is not disclosed by neither Google nor Motorola.

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