Google acquisition of Motorola stalled as China extends probe

Computerworld - The Chinese government, Google's last hurdle to acquiring Motorola Mobility, is slowing up the purchase process by expanding its investigation into the pending transaction.

Motorola filed documents with the U.S. Securities and Exchange Commission on Sunday that showed that the Anti-Monopoly Bureau of the Ministry of Commerce People's Republic of China has extended the second phase of its investigation.

The filing gave no indication of how long the second phase of the review could take, but Motorola noted on its filing that executives are still hoping to close the purchase deal in the first half of this year.

Last month, the acquisition received approval from both the U.S. Department of Justice and the European Commission. The deal later was approved by officials in Israel and Taiwan. China is the only holdout.

Google wants to expand its business into more hardware ventures, with the plan to purchase mobile-phone, set-top box and tablet maker Motorola Mobility for about $12.5 billion.

Buying Motorola would also help Google push its way into the home entertainment market with its Google TV platform. Motorola, a world-renowned smartphone maker, also is a major player in the home set-top box sector.

The purchase also would help Google defend itself against various patent infringement lawsuits over the Android mobile operating system, since Motorola has one of the smartphone industry's largest patent libraries.

According to Google, the company is working to wrap up the review process as quickly as possible. "We continue to await regulatory approval in China and to work closely with regulators," a Google spokesman said in a statement emailed to Computerworld. "We are happy to answer their questions and discuss any concerns. Google and Motorola Mobility together will enhance competition in mobile computing, offering consumers faster innovation and a wider range of choices."

When asked for a comment, Motorola referred to information in its SEC filing but did not elaborate. China did not respond to a request for information about the second phase of its acquisition review.

Google and China have a complex history and Chinese regulators have little incentive to make this easy on the company.

Early in 2010, Google squared off with China after a major cyberattack from within the country was launched against Google's computer systems. Google considered pulling its business out of the country after the attack, which was aimed at exposing the Gmail accounts of Chinese human rights activists. In the wake of the attack, Google also stopped censoring the search results of its users in China.

The two giants have not been able to work out an agreement since then.

"Well, the Chinese government doesn't like Google and Google probably doesn't like China," said Ezra Gottheil, an analyst with Technology Business Research. "And the other [smartphone] handset OEMs are probably lobbying China to throw a stick in the spokes. China has a real interest in the continuing growth of the smart handset industry. Virtually every smart handset is assembled in China, and smart handsets are the fastest selling new product in history."

Gottheil, though, said he doesn't think China will derail the acquisition, but it very well may slow it down and force Google's hand in some tough negotiations.

Sharon Gaudin covers the Internet and Web 2.0, emerging technologies, and desktop and laptop chips for Computerworld. Follow Sharon on Twitter at @sgaudin, on Google+ or subscribe to Sharon's RSS feed . Her email address is sgaudin@computerworld.com.

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