GoogleIsrael news photo: Arutz Sheva

Google Inc. has announced it will buy phone hardware maker Motorola Mobility Holdings Inc. for $12.5 billion.

Reuters reported that the sale is meant to bolster adoption of Google’s Android mobile software and compete with smartphone rival Apple Inc.

In its biggest deal to date, Google said it would pay $40 per share in cash, a 63% premium to Motorola Mobility’s Friday closing price on the New York Stock Exchange.

Shares of Motorola Mobility jumped 59% following the sale announcement on Monday.

Google has been forging ahead in the smartphone market but has been hampered by a lack of intellectual property in wireless telephony.

A source close to the deal told Reuters Google swooped in to buy Motorola Mobility after losing out on Nortel’s patents.

The source said, “It is much more than just a patent sale. It is obviously more than a strategy shift for Google that is very significant.”

Activist investor Carl Icahn, Motorola’s biggest shareholder, welcomed the sale, saying in a statement the deal is “a great outcome for all shareholders of Motorola Mobility.”

Google plans to run Motorola Mobility as a separate business and has said the deal will close by the end of 2011 or early in 2012.