Google has sold its loss-making Motorola Mobility smartphone business to China’s Lenovo for $2.91bn (£1.76bn) in a move that could potentially significantly strengthen Lenovo’s position in the smartphone market.
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The deal comes a mere two and a half years after Google pounced on Motorola Mobility in a move Larry Page himself characterised as an attempt to “supercharge” the Android operating system, and barely a week after Lenovo gobbled up another US asset in the shape of IBM’s x86 server business.
For its money, which is comprised of $1.4abn at close - $660m cash and $750m in Lenovo shares, and $1.5bn in the form of a three-year promissory note, Lenovo will get its hands on the Motorola brand and Motorola Mobility's portfolio of smartphones including the Moto X and Moto G and the DROID Ultra series, as well as the brand’s future product roadmap.
Google will, however, retain control of most of the Motorola Mobility patent portfolio – numbering around 17,000 – and license them back to Lenovo, although the buyer will nevertheless receive over 2,000 patent assets.
In its statement announcing the deal, Lenovo made much of how the deal would strengthen its position in the global smartphone market – it is already a strong force in emerging markets but has gained little traction in mature markets such as Western Europe and North America.
“We are confident that we can bring together the best of both companies to deliver products customers will love and a strong, growing business. Lenovo has a proven track record of successfully embracing and strengthening great brands – as we did with IBM’s Think brand – and smoothly and efficiently integrating companies around the world,” said Lenovo CEO Yang Yuanqing.
Google’s Page added: “Lenovo has the expertise and track record to scale Motorola Mobility into a major player within the Android ecosystem. This move will enable Google to devote our energy to driving innovation across the Android ecosystem, for the benefit of smartphone users everywhere.”
However, although Motorola Mobility is currently the third largest smartphone brand by volume in the US, it is a much reduced force and its global status has fallen substantially from a high point in the middle part of last decade, before the emergence of Apple as a force in the mobile market.
Its initial purchase by Google was met with scepticism in some quarters, with many, including the European Commission, as our sister title ComputerWeekly reported, suggesting that Google might anger the likes of Samsung or HTC by restricting the use of Android to Motorola. Both the EC and US regulators said they would monitor Google’s and rivals’ use of patents.
TechMarketView’s Richard Holway said that while the deal put Lenovo on the smartphone map, “turning the Motorola loss-making division might be a more difficult task.”
In a note to clients this morning, Holway said: “Bluntly, it looks like a good deal for Google. Lenovo will give Google a great entre into the all-important Chinese market for Android. And free them of an operation which increasingly looked like an unwelcome diversion for an otherwise fast-motoring business.”