Google is selling Motorola Mobility to Lenovo, giving the Chinese smartphone manufacturer a major presence in the US market. Lenovo will buy Motorola for $2.91 billion in a mixture of cash and stock. Google will retain ownership of the vast majority of Motorola’s patents, while 2,000 patents and a license on the remaining patents will go to Lenovo. Lenovo will pay Google $660 million in cash, $750 million in stock, with the remaining $1.5 billion paid out over the next three years.
GOOGLE BELIEVES LENOVO CAN TURN MOTOROLA INTO “A MAJOR PLAYER WITHIN THE ANDROID ECOSYSTEM.”
“Lenovo has the expertise and track record to scale Motorola Mobility into a major player within the Android ecosystem,” Google CEO Larry Page said in a statement. “This move will enable Google to devote our energy to driving innovation across the Android ecosystem, for the benefit of smartphone users everywhere.”
Google initially bought Motorola Mobility for $12.5 billion back in 2012, but it said at the time that it was mainly interested in the company’s patent portfolio. Now, Google is offloading its subsidiary’s handset business, which has been losing hundreds of millions each quarter since the purchase. Google previously sold off Motorola’s set-top box unit for over $2 billion.
Though patents are a large part of what drew Google’s interest to Motorola in the first place, those patents haven’t been as helpful as Google initially hoped. Google appears to have highly overvalued Motorola’s portfolio, which hasn’t been able to bring in nearly as much in royalties as either company seemingly expected.
Lenovo has been vocal about its intention to move into the US market this year. Though it hasn’t actively pushed its own devices in the United States, it did make a bid for BlackBerry late last year. Though its offer was blocked, picking up Motorola’s device unit could give it an even stronger start. It would mark Lenovo’s second acquisition announcement this month: just last week it announce that it reached a deal to buy IBM’s x86 server business.
— A Googler (@google) January 29, 2014
Lenovo has experience in taking an established brand and building upon it. It purchased its ThinkPad business from IBM in 2005, and has gone on to create a continually successful line of laptops. Lenovo is likely hoping to do the same with Motorola, which has consistently built strong devices but has often struggled against competitors with more marketing muscle.
“The acquisition of such an iconic brand, innovative product portfolio and incredibly talented global team will immediately make Lenovo a strong global competitor in smartphones,” Lenovo CEO Yang Yuanqing said in a statement. “We will immediately have the opportunity to become a strong global player in the fast-growing mobile space.”
“WE WILL BECOME A MUCH STRONGER NUMBER THREE SMARTPHONE COMPANY.”
Both Lenovo and Google have high expectations for Motorola coming out of the acquisition. Motorola said the acquisition will help it to achieve the rapid growth it’s looking for. “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,” Motorola CEO Dennis Woodside said in a statement.
On a conference call discussing the acquisition, Yuanqing said that Woodside as well as Motorola’s existing management team would be staying on board. Yuanqing also said that he felt the two brands were complimentary, and that both the Motorola and Lenovo brand would remain in use where they were already strong. “A detailed plan will be made after we close the deal,” Yuanqing said.
Despite Motorola’s struggles, Yuanqing is extremely optimistic about what it can do under Lenovo. “Why am I so confident? I have several reasons.” Yuanqing cites five reasons for the acquisition: it will immediately make Lenovo a major smartphone company in the US, Motorola is an established and respected brand, the deal includes important patents and licenses, it will help address new markets with a diverse smartphone lineup, and it brings along Motorola’s expertise in mature smartphone markets.
Despite his intention to keep the Lenovo name where it’s strong, Yuanqing emphasized that the Motorola name would play a strong role in its ability to compete in the United States and other major markets. “We had a similar opportunity with the Think brand, and we succeeded,” Yuanqing said. He believes the acquisition will make Lenovo the third-place smartphone manufacturer, making it a strong competitor against Apple and Samsung.
“We will become a much stronger number three smartphone company,” Yuanqing said. “Motorola brings a strong brand, brilliant engineering, great products, outstanding relationships with retailers.”
News of Lenovo’s acquisition of Motorola comes just a day before Google reports its quarterly earnings. Investors have been interested to know what Google plans to do about Motorola’s mounting losses. Tomorrow may not deliver them good news from the previous quarter, but it appears Google has given its final answer.
read more: http://www.theverge.com/2014/1/29/5358620/lenovo-reportedly-buying-motorola-mobility-from-google