Google Sells Motorola Business to China’s Lenovo

Google

Google has decided that it’s time to sell its Motorola Mobility business, and on the other end of the transaction China’s Lenovo sits smiling after its new purchase. The nearly $3 billion deal will be the latest in a Motorola saga that has left Google’s shareholders with mixed feelings. The Motorola experiment appears to be one that has been less than satisfying for Google. The $12.5 billion acquisition of Motorola, while some argue was a win in the end, has brought less than expected results Google’s way.

The handset experiment was a relatively short one for the internet giant. Google owned and operated Motorola for just around 22 months. Although there were high hopes for moving into making mobile handsets, the numbers didn’t quite add up in the end. Some speculate that a bit of “Apple envy” is what drove the company into the mobile making industry, and while Google has not admitted to such, it looks like the move was a little ambitious. Since the outset, it was quite clear that competing on a global scale with other mobile manufacturers was going to be a tough ask for the internet giant looking to branch out.

Although Google has decided to sell its Motorola business to China’s Lenovo, the purchase of Motorola hasn’t been a huge bust. With the $12.2 billion dollar purchase, Google did get a healthy $3 billion in cash. In addition to the cash, the internet giant was able to quickly spin off part of the Motorola business (set-top box) for approximately $2.35 billion. Through it all, and in this latest sell to Lenovo, Google has chosen to retain a significant portion of Motorola’s patent portfolio, thus keeping itself in the game to a degree. While there were some good things about the deal, the internet giant still ended up eating significant losses heading into the home-stretch of last year.

Google has taken a step back when it comes to the handset business, and it looks as though the company has decided to lick its wounds and devote its energy to areas in which it already finds itself in strong positions to make global progress. With huge recent acquisitions like Nest, along with other purchases such as DeepMind, Google certainly has a number of areas in which it can devote newly freed resources.

Lenovo, the Chinese tech company which gained public recognition starting in the mid 2000’s, is in a much better position to take advantage of a brand like Motorola. Lenovo is also smiling at the chance to shortcut its way into a big position in the US market. The Chinese PC-maker, which went from a relatively obscure manufacturer to now being the world’s largest maker of PC’s is hoping to repeat its success with its newly purchased brand.

Lenovo’s CEO Yang Yuanqing has voiced the ambitious goals of the company, highlighting that the Chinese powerhouse expects to sell 100 million handsets in the year following the closure of the Motorola deal. Some analysts are pessimistic about Lenovo’s lofty goals, citing that the golden days of Motorola are long gone. The critics point to the long-gone days of the motorola Razr, and argue that the smartphone world has left Motorola behind. Lenovo however continues to show a high level of confidence in its ability to achieve its lofty goals.

Yan, and Lenovo do not foresee US regulations as representing a hindrance to its futures success, while some believe that the new purchase may catch the eyes of the Committee on Foreign Investment in the US (CFIUS). The sheer mass of units Lenovo expects to sell, along with the fact that it is a Chinese company which aims to be involved in US telecommunications, may be enough to get a second look by the CFIUS. Although there appear to be mixed feelings on the subject, CFIUS is not viewed by many as posing a deal-killing threat to the Google-Lenovo-Motorola deal.

As it stands, Google has decided it’s time to sell off Motorola, and Lenovo has found itself smiling at the other end of the nearly $3 billion transaction.

By Daniel Worku

Wall Street Journal

USA Today

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