Google Challenges Itself With Motorola Deal

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tdp2664 InvestorPlace Since taking the helm of Google ( Nasdaq : GOOG ) in April, Larry Page has wasted little time. He launched the Google+ social network, which is growing at a rapid pace while trying to attack Facebook, Twitter, Zynga and Skype. Page is also getting aggressive in mobile, with the company's Android operating system seeing 550,000 activations per day. Great, but there are no meaningful profits (the software is free). Instead, it is Apple ( Nasdaq : AAPL ) that is cleaning up in mobile. So to ramp up the monetization, Google has agreed to pay a whopping $12.5 billion for Motorola Mobility (NYSE: MMI ). By far, it is the company's largest deal — actually, it is one of the biggest transactions in tech history. Google says the deal is really about getting Motorola's extensive patent portfolio — and this is certainly a key. Google needs to find a way to protect Android from major legal assaults. However, this may be just a cover. Rather, it looks like Google wants to radically change its strategy and become a player in the handset business, and Apple has shown the power of having tight integration between software and hardware. But there will be some major challenges. First of all, Motorola may not necessarily be a good choice. True, the company has made great strides in developing good smartphone models. But they are not sold at Apple-like premium prices. Motorola has also had an erratic history in terms of creating popular handsets. What about Motorola's Xoom tablet business? While it is getting momentum, Motorola only sold 700,000 of them for the first six months of 2011. During this period, Apple sold a whopping 14 million the iPads. But perhaps the biggest issue is that Google will essentially become a rival to its partners, like HTC, LG and Samsung. Funny enough, the company has spent much time building the ecosystem. But with Google owning Motorola, it's a good bet that Google's partners will scramble to find alternatives. One possibility is to team up with Microsoft ( Nasdaq : MSFT ). Finally, Google will need to deal with the mind-numbing complications of taking on a company the size of Motorola, which has 19,000 employees. There is also the need to manage Motorola's set-top business. Even though it may represent an opportunity to get a bigger footprint in the consumer market — and boost Google TV– it will add to the managerial complexities. Page has a lot on his plate. It does seem like he really wants to achieve global domination – and as fast as possible. But this strategy is downright scary. If history is any indication, pulling off transformative acquisitions is nearly impossible. Just look at Cisco (Nasdaq: CSCO ) — with a substantial drop in the stock price over the past year, the company has been working hard to unwind some of its deals and cut costs. Yet there are some clear winners. Of course, Motorola's shareholders are quite happy, especially Carl Icahn (who is the largest holder). His stock position is up more than $470 million today. And another big winner is Apple CEO Steve Jobs. He must be smiling right now. Tom Taulli is the author of various books, including " All About Commodities " and " All About Short Selling ." You can find him at Twitter account @ttaulli . He does not own a position in any of the stocks named here.