Google sells Motorola to Lenovo

January 30 2014

Google has finally agreed to sell Motorola Mobility to Lenovo, giving the Chinese smartphone manufacturer a large presence in the US market. The deal has closed at $2.91 billion in which $660 million will be paid in cash and $750 million in stocks. Remaining amount will be paid over the next three years. Even after the sell, Google will retain a larger majority of Motorola’s patents while 2000 patents and a licence on remaining patents will belong to Lenovo.

The deal is being considered risky for both Google and Lenovo. Going just a few months behind, Google had paid $12.5 million to acquire Motorola, and now selling it with such a huge loss. On the other hand, the performance of Motorola has proved that paying anything for this brand is a risky venture for any company. Lenovo CEO Yang Yuanqing has accepted that his company doesn’t have any effective plan yet, still they are confident that the deal will be a beneficial one for them. The CEO is pretty much confident to sell over 100 million smartphones within a year.

“Lenovo has the expertise and track record to scale Motorola Mobility into a major player within the Android ecosystem,” Google CEO Larry Page said in a statement. “This move will enable Google to devote our energy to driving innovation across the Android ecosystem, for the benefit of smartphone users everywhere.”

The question arises here is why Google was so interested in Motorola at first place? The certain answer is, Motorola’s patents. Google had perhaps overvalued Motorola’s portfolio, but eventually it hasn’t been able to bring as much in royalties as either company seemingly expected. Apparently, the main motive behind that deal was to block the sales of iPhone, but eventually it turned to be a headache for Google. And finally the search engine giant decided to cut its losses by selling the subsidiary company.

Lenovo can see this deal as a profitable one as it will open the doors of its entrance in the US smartphone market. The company has already tried this by placing a bid for BlackBerry late in 2013, but its offer was ultimately blocked. But they do not have to make too much effort to acquire the ownership of Motorola. This is the second big deal by Lenovo in one week, as they have already said that they have reached a deal to buy IBM’s x86 server business earlier this week.

“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. “We will immediately have the opportunity to become a strong global player in the fast-growing mobile space.”

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