Investors lose faith in Google’s Motorola acquisition

Google's share price tumbled more than four per cent on Monday as some investors showed signs of losing faith in the firm's acquisition of Motorola.

Google is expected to complete the $12.5bn acquisition of the mobile device company early this year.

However, at the end of last week, Motorola warned its sales would total $3.4bn, missing analysts' expectations.

Motorola said its financial results had been impacted by the increased competitive environment in the mobile device business and the high legal costs associated with ongoing intellectual property litigations.

Such a statement is likely to have raised alarm bells with investors concerned about Google's entry into such a highly competitive smartphone market.

At the same time, Microsoft has launched legal action against Motorola in London's High Court for patent infringement.

However, IDC analyst Francisco Jeronimo told V3 there was no reason for investors to be concerned.

"In the next quarter we will see Google starting to develop Motorola's product portfolio and then we can pass judgments on the unit's finances," said Jeronimo.

"We do not know if Google even wants Motorola to be one of the top three players in the mobile market, or whether it wants to use Motorola as a type of 'labs centre' to help the development of Android."

Gartner analyst Roberta Cozza was of a similar opinion, saying it was too early for Google's investors to be concerned because the web giant had a good chance of turning around Motorola's fortunes.

"The poor results of Motorola are a result of other players in the Android market simply doing better. It is becoming difficult for some players like Motorola to differentiate their products," she told V3.

"Google has not yet outlined details of what it will do with Motorola, but one scenario would be that Google uses Motorola to produce lower-end Android devices to benchmark what lower-end devices could be, because at the moment the lower-end market is fairly compromised."

Cozza added that the Google acquisition could be a good opportunity for Motorola.

There has been ongoing concern among investors about Google's plans to buy Motorola. When the acquisition was first announced there were worries that the deal could alienate Google's Android partners such as Samsung and HTC.

However, Google executive chairman Eric Schmidt reassured partners that Motorola would be run as an independent business unit and that the deal would not affect their use of Android.

Motorola will release its fourth quarter earnings report on 26 January.

Google declined to comment on Motorola's preliminary earnings or the Microsoft patent case.