Google sells Motorola Mobility to Lenovo

Ian Scales
By Ian Scales

Jan 30, 2014

You have to laugh. After all the fuss, Google has sold Motorola Mobility to Chinese vendor Lenovo for $2.9 billion, much less than the $12.5 billion it bought it for in the first place, but quite a bit less than was paid by Microsoft to buy Nokia’s handset division.

It turns out that Lenovo was the ideal owner. It had been looking for an acquisition for some time to bolster its brand presence in the global smartphone market and build market share. The other obvious candidate for Lenovo was Blackberry and there’s little doubt that talks between the two had ocurred as well.

Naturally, Motorola’s patent hoard (the original reason for the Google buy) will be staying with Google, but Lenovo will get a license as part of the deal to use all the Motorola IP. It also gets to own 2000 patents and to keep the Motorola Mobility brand(s) which Lenovo says its going to maintain.

So why do you have to laugh? Because ‘bang’ goes the strategy that many observers, including myself at one point if I’m honest, had gradually retro-fitted on to the surprising Google acquisition made back in August 2011. That is, that the high stakes smartphone game had matured and was now all about part-matching Apple’s top to bottom control by owning (or at least having a hand in) hardware, OS, content and cloud (though not necessarily in that order).

Then, when Microsoft bought Nokia, it looked as though it had started believing this as well, although we thought the real reason was that it had no choice but to buy Nokia. The alternative was to see Windows Phone die a sudden death with Nokia defecting to Android.

Back at the original bombshell my colleague Guy Daniels reported in August 2011 that Larry Page’s blog was all bright eyes and bushy tales (sic) and he was naturally anxious to allay Android licensee fears that Google was moving in on the hardware business.

“In 2008, Motorola bet big on Android as the sole operating system across all of its smartphone devices. It was a smart bet and we’re thrilled at the success they’ve achieved so far. We believe that their mobile business is on an upward trajectory and poised for explosive growth,” wrote Larry.

“Together, we will create amazing user experiences that supercharge the entire Android ecosystem for the benefit of consumers, partners and developers everywhere. This acquisition will not change our commitment to run Android as an open platform. Motorola will remain a licensee of Android and Android will remain open. We will run Motorola as a separate business.”

It turned out that Larry needn’t have worried. There probably were always fears that Google might elbow Motorola into a leading market position, but Motorola’s non-performance over the past two and a half years under the Google wing must gradually have put those fears to rest - instead of dominance Google got to suffer large losses at its new division.

As against that, the acquisition may have worked as a sort of feint, making Google’s new position as handset vendor appear strategically dangerous for the other big players in the market. Several analysts certainly characterised it as such at the time.

More likely, as we pointed out, the real reason for the move was to enable Google to get its desperate hands onto enough semi-relevant intellectual property to enable it to protect Android and its partners. There was no doubt that potential patent challenges from both Apple and Microsoft represented an existential threat to Android, so yes, $12.9 billion was a big sum to pay, but it made sense if there was a chance that the Motorola brand, working at arm’s length from Google, might also generate some cash in the medium term.

Was having a hardware arm ever thought of as crucial by Google? Less sure. Since it’s now disposed of it for small change (in Google terms) we can conclude that it’s not considered strategic now. In fact Google appears to have struggled to negotiate even that amount out of Lenovo. According to reports it gets a small down-payment of $660 million, another $750 million in Lenovo shares and the remaining $1.5 billion won’t be due for another three years.

And what have we learned? Forget strategy, they just make it up as they go along.

Follow the writer on Twitter @ ian_TTV

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