Google shook up the mobile phone industry Monday with the announcement it is buying US handset maker Motorola Mobility for $12.5 billion in cash in a bid to extend the reach of its Android platform.

The surprise move gives Google a strong patent portfolio to defend Android against attacks from smartphone rivals such as iPhone maker Apple and turns a company known for its software into a hardware manufacturer.

Analysts said the acquisition also has major implications for handset makers such as Taiwan's HTC, South Korea's Samsung and others who are using Android to power their mobile devices.

Google and Motorola Mobility said they have entered into an agreement under which the Internet titan will buy Motorola Mobility for $40.00 per share, a 63% premium over the closing price of Motorola Mobility shares on Friday.

They said the boards of directors of both companies have unanimously approved the deal, Google's largest acquisition ever.

Under the agreement, Motorola Mobility will remain an Android licensee and Google will run the unit as a separate business.

"Motorola Mobility's total commitment to Android has created a natural fit for our two companies," Google chief executive Larry Page said in a statement.

"Together, we will create amazing user experiences that supercharge the entire Android ecosystem for the benefit of consumers, partners and developers."