The transaction is expected to close by the second quarter of 2013, subject to regulatory approvals.

Google will have a roughly 15.7 percent ownership interest in Arris, a Suwanee, Georgia-based cable equipment maker, after the deal.

Shares of Arris jumped nearly 17 percent to $16.99 in afterhours trading on Wednesday following the news. Google's stock was down $1.61 at $718.50.

The companies said the deal would increase Arris' patent portfolio and provide a license to a "wide variety" of Motorola Mobility patents but did not provide details.

Google had been expected to sell the set-top business, following a disclosure last week by British TV decoder maker Pace Plc that it had made an offer to Google. Arris had also been cited among the bidders in media reports.

Google acquired the set-top box maker in May as part of its $12.5 billion purchase of Motorola Mobility, a deal motivated by a desire to snap up Motorola's large portfolio of communications patents.

Since acquiring Motorola, Google has moved to revamp the company's money-losing mobile phone business, while appearing less interested in the set-top business.

The sale of the Motorola Home business, which includes manufacturing facilities, should relieve some of the concerns that investors had about Google's acquisition of Motorola, said Needham & Co analyst Kerry Rice.

"Google has effectively offloaded most of the manufacturing that now is associated with Motorola," and that investors feared would pressure Google's profit margins, said Rice.

"They're keeping the things that are most important to them, the design and patents of the mobile phone side," said Rice.

Google said the Motorola Home business is profitable and generated revenues of $3.4 billion for the trailing four quarters ended September 30.

(Reporting By Alexei Oreskovic; Editing by Gary Hill, Leslie Gevirtz and Steve Orlofsky)

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