By Philip Elmer-DeWitt
October 19, 2012

FORTUNE — We may never know for certain whether Google (GOOG) spent $12.5 billion on Motorola Mobility last May primarily because Sergey Brin and Larry Page wanted to get into the cellphone and set-top box manufacturing business or if they thought Motorola’s 17,000 patents would give them some IP armor to fend off Apple’s (AAPL) “thermonuclear” assault on the Android operating system.

What became clear Thursday with the premature leak of Google’s quarterly earnings was how much that acquisition was hurting the company.

The Wall Street Journal‘s Spencer Ante summarized it neatly on the paper’s live blog:

“This is the first time that Google consolidated the results of Motorola Mobility into its earnings and the picture is not pretty. The Motorola unit’s operating loss was $527 million, helping to drag down Google’s profit number, which badly missed Wall Street expectations. In the second quarter, when Google closed the acquisition on May 22, Google said Motorola’s operating loss was $233 million.”

Trading in Google was halted shortly after 1 p.m. at the request of the company after its shares had fallen $83 (11%). They recovered a bit when trading resumed at 3:20. The stock closed at $695.42, down $60.07 (7.95%) for the day, shaving $19.6 billion off the company’s market cap.

In September, Jim Cramer told his CNBC listeners that Google (5-year average growth rate: 29%) might be a better investment than Apple (5-year average growth rate: 66%). How’s that working for you?

You May Like