$250 million for a long term hardware partner is not much compared with the $12.5 billion Google is spending to acquire Motorola Mobiity in order to have one...and Google doesn't even get royalties back to cover part of the costs.
Indeed, considering the very real possibility of patent licensing fees, Microsoft may even get a slice of every hand set Google sells.
On the other hand, considering that Nokia is and will continue to feature Windows Phone in their advertising, Microsoft is likely to further benefit from the expenditure.
Motorola had $3.2 Billion in cash, and its losses act as tax deductions for Google (8yrs * $700 million = ~$5.6 Billion, from the article). 12.5 - 3.2 - 5.6 = $3.7 Billion.
The amount of unused tax benefits MM has is $1.7 billion according to the article - the $700 million a year figure is speculation by an analyst.
Furthermore, future tax benefits ought to be discounted to a current value and the potential rate of return for alternative investments for Google's cash must be considered.
Not to mention that Microsoft's $250 million also affects their taxes.
It's such a huge amount of money. Patents are what they officially say. Obviously, they have partners and they don't want to lose them in the short term, so protecting them seems pretty harmless. But they will inevitably compete at some point in the future. That seems to be one of the reasons behind the "patent story".
The other two might be that they are making so much less money on every device they sell than Apple. It could possibly become a reasonable source of revenue (Google almost always talks about market share of Android, not the revenue).
The last thought, is the big picture of utilizing the emergence of tablets to become a predominant player in the industry. Beyond search. And somehow surpass Microsoft and Windows as the omnipresent platform. That seems really tough.
No I believe the hardware side of the mobile division is included. But that was just a bonus (or a curse?) for Google who, as you said, just really wanted the patent.
I'm not so sure anymore that was Google's only intent. Google may be later be forced to become an OEM. As of today, it's quite a reality that Samsung (who sells 55% of all Android smartphones), Amazon, Facebook and Baidu won't completely fork Android in their own best interest. It may behoove Google to develop a Nexus line that covers a wide range of prices.
Indeed, considering the very real possibility of patent licensing fees, Microsoft may even get a slice of every hand set Google sells.
On the other hand, considering that Nokia is and will continue to feature Windows Phone in their advertising, Microsoft is likely to further benefit from the expenditure.