Google Mines Motorola's Patents Trove

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

NEW YORK (TheStreet) -- Last year Google's(GOOG) $12.5 billion acquisition of Motorola Mobility(MMI) seemed very expensive, with a whopping 63% premium.

However, Motorola's rich patent portfolio of over 17,000 granted patents and approximately 7,500 pending patent applications makes it a good strategic acquisition.

On Monday, the Department of Justice finally closed its investigation into Google's acquisition of Motorola Mobility, though it did note that Google was more ambiguous than rivals Apple(AAPL) and Microsoft(MSFT) in affirming fair, reasonable and non-discriminatory licensing agreements for standard-essential patents.

Our $627 price estimate for Google stock is about 2% above the current market price.

See our complete analysis of Google here.

The Justice Department correctly identified Google's stance on the patent issue as ambiguous. In our earlier note, we discussed how Google's promise to follow fair licensing for Motorola patents is questionable. We also recently discussed how Google stands to gain from Motorola's aggressive patent suits against Apple and Microsoft recently. s

Patents have started to play an increasingly important role in the smartphone industry as companies jockey to build up their portfolio of patents. With an arsenal of patents, large companies can deter others from suing it for patent infringement. Google has lagged in this area and given the rising importance of its Android platform and the mobile boom, it needs these patents to protect its growth. It will be interesting to see how Google will leverage Motorola's rich portfolio of patents, now that the acquisition has been approved.

Click here to find out how a company's products impact its stock price at Trefis.

Like our charts? Embed them in your own posts using the Trefis Wordpress Plugin.

>To order reprints of this article, click here: Reprints