Lenovo Buys Motorola from Google
Today we got confirmation that Google sold its money-losing Motorola handset business for about $3 billion to Lenovo. Google bought Motorola for $12.5 billion a couple of years ago, then sold off the set-top box unit and now the handset division. With the sale Google retains many of the valuable Motorola patents it sought initially.
It is pretty clear that what Google got from the entire Motorola purchase was the nearly 10,000 patents in the portfolio. These have seen mixed success (mostly failure) in defending Android against Apple lawsuits, but will apparently remain key Google assets going forward.
From TechCrunch:
Of that $2.91 billion, $1.41 billion will be paid at the close of the deal. $660 million will be comprised of US cash and $750 million in Lenovo ordinary shares. The remaining $1.5 billion will be paid in the form of a three-year promissory note.
Google will maintain ownership of the vast majority of the Motorola Mobility patent portfolio. Lenovo will still receive 2,000 patent assets and the Motorola Mobility brand and trademark.
With the purchase, Lenovo becomes the #3 smartphone handset maker behind Samsung and Apple, with an incredibly strong presence in China and other emerging markets. Motorola gives them an entry into the US market.
Here are a few thoughts on
– Google really has no expertise or desire to run a full handset business
– Ridding themselves of Motorola makes Google seem less like a competitor to Samsung, etc.
– Motorola is a strong brand in the US and EU … for a while Android WAS Droid. Lenovo can leverage that power like they did with ThinkPad.
I have to confess that I am hoping that this results in either a Droid 5 or Droid Pro 2 being released in the near future, but I know those are niche product categories (keyboard slider and Blackberry-clone) so I don’t hold much hope.
What are your thoughts? What do you hope to see from the new Lenovo-owned Motorola?
Of interest: Google is keeping Project Ara, the modular phone project. It will be interesting to see what they’re going to do with it since they don’t, you know, own a hardware company any more.
Keeping – or maybe Lenovo didn’t need/want it?
This seems like a lot of money down the drain – no matter which way you slice it.
Motorola was purchased for $12.5 billion. At the time of purchase, it had about $3 billion cash on hand. Motorola Home (set-top boxes, modems, etc) was sold for $2.5 billion. And finally, Lenovo’s purchase of Motorola Mobility for $3 billion.
That leaves a loss of $4 billion… if you assume that Motorola’s patents and research division are worth $0. Google’s sale of Motorola to Lenovo did not include… its patents and research division. The 10-Q that Google submitted after its purchase of Motorola valued Motorola’s patents at $5.5 billion. IF you believe Google, then they got the patents at a decent discount.
While us armchair technologists have no way to verify that figure (though quite a few blogs would have you believe otherwise, to the detriment of Google), it’s also important to note: pre-sale Motorola was preparing to wield its patents against Samsung and HTC. This was around the time of the Samsung Galaxy S2, HTC Thunderbolt, and HTC Evo So Many Variants I Couldn’t Possibly List Them All Here, and shortly before the One X and Galaxy S III. In other words, Android’s formative years.
How much damage could Motorola have done? Of course we’ll never know now. But just a few months later, Larry Page announced the purchase of Motorola.
Agreed. Not only that, but its impossible to measure if owning Motorola protected android from other patent lawsuits that would have hurt growth, but Moto was able to act as a shield because of its own deep patent bench.
The 5.5 billion is the big one in there … but I call it a BS number because in other litigation Moto had to value their patents and put up $170 million/year.
Also, Moto has lost ~$2 billion while part of Google – and while Google gets some write-off considerations (which help with taxes considerably) – it is still a loss.
There is definitely a sense that the lawsuit-frenzy slowed due to the Google-Moto purchase, but whether that is actually good or bad for competition, consumers and the technology market remains to be seen.
Also, during this time Samsung has continued to assert authority and pressure on the market, being more and more important (arguably as important to Android as Google in many ways) – to the point that Google keeps shifting things OUT of the AOSP into private areas that they can control.
But I think that unless you only take the most optimistic estimates, the best you can really say is ‘Google came out with the patents they wanted, and didn’t lose too much money as a result’.
I think your last sentence sums it up pretty well. Some folks are being ridiculous and trying to suggest that everything went exactly as Page planned. I don’t agree with them at all; I just don’t think it’s as bad as many people’s gut reactions are telling them, either.
I’ve read those analyses, too. You left out that Motorola also had tax credits of $1B at the time of the Google purchase, so that brings the net loss to $3.2B. However, in the 20 months since the purchase, Motorola lost over $2B, so we are back up to about a $5.5B loss.
The patents may not be worth $5.5B – maybe more like $1B – but there is nothing like shedding a business that is costing you $1B on the bottom line every year.
Many people who have Motorola phones (I do myself) are lamenting this sale. I am not – at least, not yet. First of all, my phone didn’t suddenly change overnight. Second, it appears that Google will continue to run Motorola as they have been – they are still on schedule to announce the Moto G at a big even in India next week. Third, Lenovo used to make pretty mediocre Windows computers (Legend was the old brand name), just as they now make pretty mediocre Android devices right now. However. they then bought the personal computer business from IBM and have continued the excellence of the Thinkpad notebook line in particular. I am taking the view, until proven wrong, that Lenovo will bring more attention to the Motorola brand as they did with the IBM brands in PCs. And, of course, knowing that it takes a long time to develop new mobile devices, clearly the next versions that will update the Moto X, Moto G, and the Verizon Droid line are well into development, and Motorola was probably already getting started on next year’s phones.
Re: the figures, those are all good points. I just didn’t want to get into anything too squishy. Bottom line: Google lost a decent chunk of change here, but didn’t lose a year’s (or even half a year’s) worth of profits.
As for Lenovo, I’m not pessimistic about them being Motorola’s new master… but I am a little bit apprehensive. While Lenovo has been at least competent with ThinkPad line where hardware is concerned, I hope that Motorola doesn’t follow their lead where software is concerned. There’s just too much pre-installed software on ThinkPads nowadays, and a lot of the appeal of the Moto X and G is that they they’re almost stock. Taking on crapware would be one of the easiest things to do in terms of altering Motorola phones, and certainly the easiest way to kill what they’ve got right now.