Lenovo Buys Motorola

I guess we can safely say that Moto X sales were not what Google was hoping for – less than two years after closing the purchase of Motorola Mobility, Google is kicking the can down the road, selling Motorola to Lenovo for almost $10 billion less than what they paid for it.

After purchasing Motorola in 2012 for $12.5 billion, Google has announced that they are selling Motorola to Lenovo for $2.91 billion. That’s nearly a $10 billion loss – a little less than a year’s worth of Google’s profits. But, considering Google has over $50 billion in cash stored away, maybe that’s not such a nasty blow to take. That, and Google didn’t exactly lose $10 billion – they’re still keeping the rights to Motorola’s patents, which they are licensing to Lenovo as part of the deal. That accounts for some value, along with a few Motorola offshoot divisions that Google sold off since the original purchase. Most of all, though, Google is saving money by looking into the future – the Motorola division has lost money every single quarter Google has owned it (roughly $2 billion in losses in all), and with Moto X sales proving to be less than impressive, that didn’t figure to change anytime soon. So, good for Google – they’re admitting an expensive mistake relatively early, cutting their losses, and moving on with some new patents in tow. It’s also probably no coincidence that this announcement was made shortly after the Google-Samsung patent sharing agreement was announced, suggesting that Google probably wants to move away from the mainstream hardware market (which they don’t rely on for revenue, anyway).

Oh, and it also cost 16,200 people their jobs over the past two years, but you know, who’s counting?

The impact for Lenovo is a little more straightforward. They’ll be licensing those patents from Google, and will receive the brand name and the whole trademark portfolio. While Lenovo does make their own smartphones already, and have seen a good deal of success in emerging markets, Lenovo smartphones have yet to make a push into North America. Lenovo will likely try to use the more recognized and arguably more trusted Motorola name to make inroads into North America, although if Google couldn’t turn a profit from Motorola, it’s not immediately clear why Lenovo should expect anything different.

As always, time will tell. It’s virtually guaranteed that Lenovo is hoping to get into the North American smartphone market, but that’s a hard road to go down. BlackBerry wasn’t able to make a comeback, and Nokia, now under Microsoft’s control, is struggling to hold on to its dwindling share of the market. It’s not a great place to be for brand names trying to come from behind. I guess whoever is pulling the strings at Lenovo figures it’s worth a $2.91 billion bet.


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