S&P Downgrades Google; Stock Price Drops

While some lauded Google's move to acquire Motorola Mobility for $12.5 billion on Monday, others, such as Standard & Poor's, view it as a mistake.

S&P's equity research downgraded Google to sell from a hold position and cut its target price to $500 from $700, a day after Google's Motorola acquisition.

S&P noted that it sees "greater risk to the company and stock," after the purchase and that the expensive purchase still might not protect its Android operating system from patent lawsuits.

One of the main reasons behind Google's purchase wasn't to streamline its operations vertically, though it will be able to do so, but instead to bulk up its patent portfolio to protect itself against lawsuits aimed at its prized operating system.

Google was able to add approximately 17,000 patents through its acquisition, but S&P thinks that "extensive and valuable patent portfolio," still might not protect it from the lawsuit onslaught.

S&P analyst Scott Kessler also noted that the deal could affect the company's long-term growth and financials.

Google dropped $18.23, or 3.27 percent, to $539 at the close of Tuesday's trading.