Google buys Motorola, patents, and an Android business model for $12.5 billion

Huge and totally unexpected deal, but it actually makes sense. Here’s Google’s blog post (“Supercharging Android”) and press release for the acquisition.

If the Feds let the deal go through…

• Google would own all of Motorola’s patents, and could license them to (or just share them with) other Android licensees if it wanted to. Motorola invented the cellphone almost 30 years ago, so this is worth a lot.
• Google would now be in the position to build totally integrated Android devices, designing all the hardware and software and marketing. This is one of the reasons Apple devices are so well-rounded, so it could mean better Android devices and stronger competition for Apple going forward.
• Google would finally have a real business model for Android! Instead of just giving everything away for free for a cut of advertising revenue, Google is now in the position to bring in hundreds of dollars of revenue and profit per smartphone sold, the way other companies do.
• Google would also be in the position to experiment with some more ambitious and disruptive ideas. (And you know Larry Page has to have some of those kicking around.) This could range from new sales and distribution techniques to ad-subsidized phones.
• Google might make some Android partners/competitors uncomfortable, such as Samsung, HTC, or the others, which could nudge them towards other platforms, such as Microsoft’s Windows Phone or even something new. But the phone makers are still seeing their best sales from Android, will probably get a new road to patent protection, and are still terrible at making their own platforms. So they still have good reasons to stick with Google. Anyway, it’s not like there is a good alternative right now, especially if they think Microsoft is going to do its best work for Nokia.
• Google could force Microsoft to make a bolder move, such as potentially buying Nokia or RIM.
• This could extend well beyond phones and tablets, too, and into the living room for Google TV and YouTube. Motorola is a huge set-top box maker, as NPD’s Ross Rubin reminds us.

I’ll have more analysis and coverage all day. Stay tuned.

Related: Google-Motorola: Winners and losers and 10 questions about Google’s Motorola deal

Also: What is Google buying, anyway? Here’s a breakdown of Motorola Mobility