Trouble in Googorola paradise as Motorola shareholder sues CEO for selling too cheap

Posted In Android, Mobile Web, Motorola - By Ryan On Thursday, August 18th, 2011 With 1 Comment

Ah the joys of clarity the morning after the wedding. That moment when the buckets of champagne are a distant memory and all that’s left in the cold light of day is the realisation that you’ve sold your once-trailblazing mobile brand to a search engine company for peanuts, because you’d rather escape the mobile war now than end up a helpless casualty in a faraway foxhole. Which is what happened when Google announced their acquisition of Motorola’s mobile division on Monday.

That’s all very nice and well if you’re Mr Motorola Mobility, CEO Sanjay Jha. The Google sale no doubt represented all kinds of positive opportunities, not least of which was keeping his cushy job for a few more lucrative years, with all kinds of Google stock incentives tied up very nicely with a big red bow. But if you aren’t Mr Motorola and you’re, let’s say, a shareholder who’s been thinking this whole time that your investment in one of the world’s biggest mobile manufacturing brands was going to be worth a living fortune one day, then $12.5 billion split into millions of little pieces isn’t a lot of money.

So what do you do, sitting in your shareholder armchair at home on that dreadful day? You sue the guy at the top of the pyramid, that’s what. And that’s exactly what Motorola investor John W. Keating has just done. He’s taking CEO Sanjay Jha to court for selling too cheap and accepting a deal that allegedly didn’t amount to the true value of the company Google purchased, even though Google paid a 63% premium on the shares.

Keating’s complaint outlines his dispute: “The offered consideration does not compensate shareholders for the company’s intrinsic value and stand-alone alternatives going forward, nor does it compensate shareholders for the company’s value as a strategic asset for Google.”

From an outsider’s perspective, the guy has a point. A company that almost single-handedly pioneered the mobile communications industry, and that owns factories and distribution chains and operator deals, has a hell of a lot of intrinsic value. Whether that value is higher or lower than $12.5 billion is what the courts will need to decide. But if we’re talking about sheer perceived value, Motorola blows all of Google’s previous ‘soft’ purchases out of the water. Soft here meaning the traditional valley startup with six guys in a loft who built some site that offered some service that attracted some user sign ups.

Keating is taking no prisoners in his legal action, and is seeking to have the lawsuit declared a class action, while appealing to authorities to reject the deal outright. But he’s going to have a fight on his hands. Google will no doubt assemble their usual gang of thousand-buck-an-hour lawyers, who will most probably argue that Google agreed to pay 63% above the stock price for the shares purchased, while also agreeing to a $2.5 billion break-up fee in the event that the deal doesn’t go through for any reason.

The coming together of these two giants of the industry hasn’t left very many people pleased. Some would probably paint this as a dark chapter in Android’s short history, with Google now positioning itself to compete against the very manufacturers responsible for Android’s mass penetration across multiple handset models when it first entered the market. Others may see this as a desperate move by Google, which has now doubled its staff complement overnight, and taken a bloated, old-fashioned, unpopular mobile company into its fold. Only time (and the courts) will tell.

About - With at least 20 phones tucked away in drawers around the house and office, Ryan is a buy-to-try mobile consumer and loves playing with new handsets. Right now he's stuck on the iPhone 4.

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  1. ThisIsMobile says:

    Not sure who I feel sorrier for, motorola or the investor taking them to court.

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