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Google confirms that it's selling Motorola to Lenovo for $2.91bn

by Mark Tyson on 30 January 2014, 09:00

Tags: Google (NASDAQ:GOOG), Motorola (NYSE:MSI), Lenovo, PC

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Google has confirmed in a blog post that Lenovo will be acquiring its Motorola Mobility division in a $2.91 (£1.76) billion agreement. The division, which was responsible for the development of the brand flagship Moto X and popular low-cost Moto G phones, was snapped up by Google back in 2011 in a $12.5 (£7.6) billion deal.

Lenovo will fork out $660 (£400) million in cash and $750 (£450) million in stock once the deal closes, with the remaining $1.5 (£0.9) billion coming through a three-year promissory note. The deal will hand over the hardware unit, brand and trademark of Motorola Mobility and 2,000 patent assets whilst Google gets to keep the "vast majority" of around 10,000 patents acquired when it bought the mobile maker.

In an official statement, CEO of Motorola Mobility Dennis Woodside said: “As part of Lenovo, Motorola Mobility will have a rapid path to achieving our goal of reaching the next 100 million people with the mobile Internet. With the recent launches of Moto X and Moto G, we have tremendous momentum right now and Lenovo’s hardware expertise and global reach will only help to accelerate this.”

The agreement also marks the Chinese electronics company Lenovo's second major deal in a week. With obvious aims of gaining a grip in major global computing markets, it's another way for the firm to buy its way into an established industry. Lenovo announced its deal with IBM last week, buying its low-end server business for $2.3 (£1.4) billion, making it China's biggest technology deal ever documented to date.

Google's CEO Larry Page commented on the Motorola sale in a blog post saying that due to the competitiveness of the smartphone market and the focus it needs when it comes to making mobile devices, the firm believes that "Motorola will be better served by Lenovo—which has a rapidly growing smartphone business and is the largest (and fastest-growing) PC manufacturer in the world."

"This move will enable Google to devote our energy to driving innovation across the Android ecosystem, for the benefit of smartphone users everywhere,” Page added.

However it is notable that Motorola Mobility has yet to live up to its purchase price under Google's management. It has lost Google $248 (£150) million in 4Q2013 alone and the cable box division of Motorola Mobility was sold off by Google previously for $2.4 (£1.45) billion.

The decision to sell Motorola might seem a curious and abrupt turn by Google, as only recently has the firm started to see the possibilities of its acquisition following the success of its Moto X and Moto G. But VentureBeat reported that its sources described some of Google's organisational decisions for Motorola as "surreal" and that Motorola never quite fit into Google. Examples such as Google reducing a 40 person team to a single person with the same productivity goals were given.

"Google got what they wanted/needed from Moto – patents, engineering talent and mobile market/device insight,” says principal analyst at J. Gold Associates Jack Gold. “They got rid of old Motorola management some time ago, and Moto as a device manufacturer was never really strategic to Google. They don’t need to be in the device business, and it got them into some hot water with their leading OEMs."

The announcement has precipitated a two per cent rise in Google's stock in afterhours trading.



HEXUS Forums :: 6 Comments

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ThinkPad business windows phones? Hmmm I'm interested :)
Thought that Google getting into making handsets was a bit strange at the time. As the article says, the only thing it could possibly do is put the OEM's noses out of joint. In which case, I wonder if we'll see Microsoft selling their Nokia purchase in a couple of years?

Lenovo though? Wow, wouldn't have thought that they would have been in the frame. Then again, I didn't expect to see them on that list of Top 5 Smartphone Sales that was in a previous Hexus article.
But VentureBeat reported that its sources described some of Google's organisational decisions for Motorola as "surreal" and that Motorola never quite fit into Google. Examples such as Google reducing a 40 person team to a single person with the same productivity goals were given.
That last bit sounds like "US Business 101" - with a lot of companies trying to do the same. Although 40:1 seems a bit extreme - 3:1 or 4:1 seems to be more de rigeur.

I'd put my opinion of that as a practice, but I don't want to get banned for using excessive bad language.
Makes sense for them to keep the patents and flog the manufacturing. IIRC they were bought back when Apple was at the peak of suing everything Android, so Google needed something to shore up the patent portfolio.
wasabi
Makes sense for them to keep the patents and flog the manufacturing. IIRC they were bought back when Apple was at the peak of suing everything Android, so Google needed something to shore up the patent portfolio.


They are still doing it together with Microsoft but they are doing it a different way:

http://www.dailytech.com/Apple+and+Microsoft+Expand+Patent+Trolling+Sue+TWC+Cisco+via+Subsidiary/article33987.htm [dailytech.com]
Google bought up MM, sold off bits, stripped out what they wanted, gained some intelligence and are now flogging off the carcass to Lenovo. I don't think it was ever about profit, it was about the knowledge gained for Google... like some brain sucking alien that leaves a zombie behind.

Lenovo turned around IBM's Thinkpad business, presumably they think they can do the same for the the commodity servers and now MM, I wouldn't bet against them. Though with Dell going private and Lenovo's recent buys the market for commodity business IT equipment might get unusually interesting...