PC maker Lenovo, which has struggled to replicate its smartphone success outside China, gets an established global smartphone brand with Motorola, while Google unloads a burden on its balance sheet and source of tension.
The Droid Ultra is one of Motorolas key franchises in the US.
(Credit: CNET) Google is unloading Motorola onto Chinese PC maker Lenovo.
Google confirmed on its
site that it has sold Motorola for $2.91 billion, consisting of $660 million in cash and $750 million in Lenovo shares, with the remaining $1.5 billion paid in the form of a three-year promissory note.
Reuters earlier reported on the deal.
Lenovo gets the Motorola brand, as well as its portfolio of devices, including the
Moto X and Moto G. In addition, it will also receive more than 2,000 patent assets, while Google will retain control of a majority of the patents it originally obtained from the Motorola deal.
A deal instantly gives Lenovo, which has a thriving smartphone business in China, but few other places, an established global brand. Google, meanwhile, will shed a business that has continually dragged down its profits.
The deal marks one of the worst investments in Googles history. In 2012, Google completed its acquisition of Motorola Mobility for $12.5 billion. At the time, it was thought that the primary reason for the acquisition was the treasure trove of Motorola patents that would help Google defend it and its partners against Apple.
The patents, however, have proven to be less than effective in warding off lawsuits, and much of the legal fighting as gone on between Apple and Samsung, with Google only tangentially related. Google and Samsung
recently signed their own cross-licensing pact.
Troubled handset business The handset side of Motorola, however, has always been a stress point between Google and its partners. While Google said it maintained a division between its
Android group and the Motorola unit, other vendors have privately expressed irritation that a partner was also a competitor.
Google did legitimately try to revive the once vaunted Motorola brand with unique products, including the Moto X, which was built in the US and could be tweaked with different colors and covers, as well as the ultra-low-cost Moto G, geared toward emerging markets and lower-income consumers looking for a competitive smartphone.
The custom back of the Moto X.
(Credit: Motorola)
Throughout the last year or so, Motorola has continually posted losses. In the most-recent reported quarter, Motorola posted an operating loss of $248 million, wider than the year-earlier period. Google reports its latest results Thursday.
Still, the move is a surprising one given that Google has been moving toward becoming more of a hardware company. Beyond smartphones, the company is pushing its
Google Glass headset and its Chromecast media dongle. It just
purchased Nest for $3.2 billion to get into the smart thermostats and smoke detectors.
"This would be at odds with its recent push to hardware," said NPD analyst Stephen Baker. "Everybody was thinking they would get more hardware-oriented. This may signal a reversal."
Gaining a global brand Lenovo, meanwhile, could conceivably jump-start its smartphone ambitions with the purchase of Motorola. As the inventor of the cell phone, Motorola has a rich legacy and a still well-known brand that Lenovo could exploit.
"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.
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