Earlier this year Motorola finalized the process of splitting into two separate companies: Motorola Mobility Holdings and Motorola Solutions. The first handles the company's mobile and consumer business while the latter develops communications products for enterprise and government.

The move was aimed at refocusing each unit on their core businesses. In a rather surprising move, however, Motorola has now agreed to sell off its cell phone division to Google.

Pending the customary regulatory approvals, this would mark Google's largest-ever acquisition yet and makes the company a serious contender in the hardware business. According to reports, the transaction price comes in at around $12.5 billion, which at $40 per share represents a 63% price premium over Motorola Mobility's closing price on Friday. The deal has already been unanimously approved by both companies' boards.

Google has a thin portfolio of wireless and telecommunications patents, which has resulted in a significant amount of patent litigation for the company and its Android partners. By acquiring Motorola Mobility, Google gets ownership of a huge collection of patents that it will be able to use to defend itself as well as the Android platform.

It's worth noting that the move also puts Google into direct competition with licensees of its Android operating system. However, the Internet giant has pledged to continue offering Android as an open platform and companies such as Samsung or HTC, which have partnered closely with Google in the past, will be able to license Android as before.

Google and Motorola expect to complete the transaction by early 2012 if no legal roadblocks get in their way.