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Google (GOOG) to Buy DeepMind, Signs Licensing Deal with Samsung

By: , dated January 27th, 2014

Shares of Google Inc. (GOOG) closed down -36.27 or -3.13 percent to $1,123.83 per share on Friday as the rest of the market sold off sharply. This morning, Google stock is up +2.01 or +0.18 percent to $1,125.84 per share in pre-market trading after news that the company will be taking over privately held Information Technology startup, DeepMind Technologies Ltd.

Also, Google signed a broad cross-licensing agreement on technology patents with Samsung Electronics Co. The deal will strengthen the two companies’ alliance against competing rival Apple Inc. (AAPL). Terms of the deal have yet to be disclosed.

Mountain View, California based Google Inc. is an international Internet corporation best known for its search engine. The company has been aggressively expanding into other information technology fields through acquisitions. Its latest acquisition of DeepMind follows the company’s purchase of military robotics company Boston Dynamics late last year.

London based Deepmind Technologies Ltd was founded in 2012 and is a privately held artificial intelligence company that uses general purpose learning algorithms in multiple applications such as simulations, games and e-commerce. According to some sources, the price Google is paying for DeepMind is $500 million, after beating out Facebook (FB) who was supposedly also negotiating to buy DeepMind. It is unclear at the moment why negotiations fell through with Facebook.

Google has invested significantly in the field of artificial intelligence, with its recent purchase of Boston Dynamics, a robotics company and now DeepMind. Google has also teamed up with automakers to integrate its Android operating system into the dashboard.

Elsewhere, Google and Samsung have signed a deal for cross-licensing patents that will cover the two companies’ existing patents and new patents over the course of 10 years. Nevertheless, the agreement does not transfer ownership of patents and therefore cannot be used by Samsung in litigation with other companies, such as with Apple Inc.

The two companies would not specify if the deal was limited to the Android operating system, which is in four of every 5 smartphones. Analysts speculate the deal will give Samsung a boost in the development of wearable devices such as Samsung’s smartwatch, called Galaxy Gear. Google is already involved in wearable digital products with Google Glass.

The deal will also benefit both companies against existing patent infringement lawsuits brought against Google and Samsung last October. A tech consortium that included Apple, Microsoft (MSFT), BlackBerry (BBRY) and Sony Corp (SNE) filed suit against the two companies in Federal Court in Texas accusing them of infringing on patents bought by the consortium from bankrupt Canadian telecom firm Nortel Networks.

Google stock is trading off of its all-time highs, made earlier this month. The company has a high beta and could be vulnerable if the market has a substantial correction. At these price levels, Google stock’s upside potential could be limited.

Other News About Google
Google Inc unit loses antitrust suit against LCD makers
Google loses lawsuit accused of a pricing conspiracy.
Google’s Latest Search Trick: “As The Crow Flies” Distance Calculation
Google’s OneBox can now calculate distances “as the crow flies”.

Other Stocks in the News
This chart says Icahn is wrong about Apple
Technically, Apple stock looks more like a sell.
Moody’s cuts Sony’s debt rating to ‘Junk’
Debt rating cut on profit concerns.

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Jay Hawk Jay Hawk enjoyed a 12-year professional financial markets career incorporating extensive first hand futures and options experience obtained by trading in the stock, commodity and forex markets on U.S. exchanges. Since retiring as a full-time financial market professional, he has been actively trading stock, commodities, forex and options for his own account and managing funds for others, as well as writing financial market commentary and educational articles.

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