I bet no one in the business saw that coming. It was a well kept secret and a bold move even for search gorilla Google as it battles Apple, Microsoft, RIM, and other companies over patents. The main goal of the acquisition was probably Motorola’s 17,000 cell-phone and related patents plus the more than 7000 patents pending. It’s a great portfolio and will eliminate or minimize some patent battles, but it could inflame others.

This acquisition is probably a good deal for Motorola, which split a while back by spinning off the cell-phone division into Motorola Mobility Holdings—what Google bought for $12.5 billion, and with cash! Yes, it’s definitely a good deal.

Motorola is a big user of Google’s Android operating system (OS), but it is not a top-tier player in the smart-phone race despite its success with its Droid line. Perhaps with Google’s backing Motorola can boost itself up with Apple, Samsung, HTC, and RIM into the top smart-phone ranks. In any case, it makes Motorola a major player. I suspect that Motorola will remain a separate business entity, at least for now.

Ripple Effects

Besides the patents, this deal gives Google a manufacturing arm. It is now officially in the hardware business to complement its software business. I suspect Google believes it now can do a better job competing directly with Apple.

Android phones, collectively, at last outsell iPhones with players like Samsung, HTC, and LG leading the way. A really interesting aspect is what Motorola’s cable set-top box products will bring to Google. Will future models bring Android OS to this business? And how will that impact the growing Internet protocol television (IPTV) revolution?

The big question is if the Motorola purchase will tick off Google’s main Android customers like Samsung, HTC, and LG. Maybe the newly acquired patents will help shield these companies from some of the legal battles. That remains to be seen. Will some of those Android users defect to Microsoft?

This acquisition really shakes up the smart-phone arena. I’m not sure what effect this move will have on RIM, which is already hurting but still a player. The impact may be minimal. One relationship that obviously will be impacted is the Microsoft-Nokia partnership. Nokia is hurting as it throws off its Symbian OS in favor of a full Microsoft Windows Mobile OS line in the works. Will some of Google’s 39 Android licensees defect and give Microsoft a boost? Again we shall have to see.

It would not surprise me if Microsoft just went ahead and bought Nokia outright. Then again, Microsoft would hurt its chances with the major smart-phone players to produce a Windows Mobile phone. I’m not sure that acquisition will happen, but who knows in this fast-changing and highly competitive marketplace? The big players have big cash reserves to play with.

The Justice Department still has to approve this acquisition. And remember, Google is already under the microscope with the Federal Trade Commission for what some call shady practices. The outcome of that is unpredictable for now but it could impact the acquisition approval process. I suspect it will happen, however, and help continue the “fun.” Now I’m wondering what AT&T, Sprint, T-Mobile, and Verizon think about the deal.