Google Selling Motorola Handset Business To Lenovo For $2.9 Billion

Google MotorolaGoogle bought Motorola Mobility for $12.5 billion in late 2011 and is apparently going to sell it to Lenovo for billions less than that. Reuters is reporting that Google and the Chinese computer maker are in talks to transfer the Motorola business for roughly $3 billion.

[Update: The deal has now been officially confirmed. More in the postscript below.]

According to Reuters at least some of the patent portfolio, which has proven less valuable than Google anticipated, is part of the transaction. Reuters says that a deal is imminent and an announcement could come as early as today.

In April last year we speculated about whether it was a mistake for Google to have bought the Motorola handset business, its largest acquisition by far to this day. The anticipated sale appears to be an admission that it was.

During the period of Google’s ownership, Motorola produced two new handsets, the Moto X and the low-priced Moto G. Both received favorable reviews but have failed to reverse Motorola’s ongoing loss of market share in the US and globally.

By comparison, Lenovo is now the world’s largest PC maker and making a run at the smartphone market. It has no presence in North America. Motorola would give it one.

Lenovo had great success taking over IBM’s computer business nine years ago and has grown it considerably. Perhaps the company will be better able to reverse Motorola’s slide than Google was.

There are quite a few former Google employees now running and working at Motorola. One would imagine that key figures, such as Motorola CEO Dennis Woodside, would either return to Google or leave entirely.

The report is amazing because, if accurate, it represents a huge loss for Google. Wall Street, however, will be relieved ad will probably cheer the move and boost Google’s stock. Google recently sold the set-top box division of Motorola for just over $2 billion and so the total loss on Motorola will be around $7 billion.

Google probably determined that, with the limited success of the Moto X and Moto G and continuing losses at Motorola, it was time to exist the handset business and remove any tension or conflicts with other Android OEMs. Some Motorola employees might greet the news as a positive development but many will see it as a demoralizing rejection of their work.

Postscript: Below is the full text of the press release announcing the deal, which is just out:

Research Triangle Park, North Carolina, and Mountain View, California – January 29, 2014: Lenovo (HKSE: 992) (ADR: LNVGY) and Google (NASDAQ: GOOG) today have entered into a definitive agreement under which Lenovo plans to acquire the Motorola Mobility smartphone business. With a strong PC business and a fast-growing smartphone business, this agreement will significantly strengthen Lenovo’s position in the smartphone market. In addition, Lenovo will gain a strong market presence in North America and Latin America, as well as a foothold in Western Europe, to complement its strong, fast-growing smartphone business in emerging markets around the world.

The purchase price is approximately US$2.91 billion (subject to certain adjustments), including US$1.41 billion paid at close, comprised of US$660 million in cash and US$750 million in Lenovo ordinary shares (subject to a share cap/floor). The remaining US$1.5 billion will be paid in the form of a three-year promissory note.

Lenovo, which in 2005 acquired IBM’s PC business and its legendary PC brand, will now acquire world-renowned Motorola Mobility, including the MOTOROLA brand and Motorola Mobility’s portfolio of innovative smartphones like the Moto X and Moto G and the DROID™ Ultra series. In addition to current products, Lenovo will take ownership of the future Motorola Mobility product roadmap.

Google will maintain ownership of the vast majority of the Motorola Mobility patent portfolio, including current patent applications and invention disclosures. As part of its ongoing relationship with Google, Lenovo will receive a license to this rich portfolio of patents and other intellectual property. Additionally Lenovo will receive over 2,000 patent assets, as well as the Motorola Mobility brand and trademark portfolio.

Motorola Mobility enjoys outstanding brand awareness around the world, and is currently the #3 Android smartphone manufacturer in the U.S. and #3 manufacturer overall in Latin America.

“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. We will immediately have the opportunity to become a strong global player in the fast-growing mobile space,” said Yang Yuanqing, chairman and CEO of Lenovo. “We are confident that we can bring together the best of both companies to deliver products customers will love and a strong, growing business. Lenovo has a proven track record of successfully embracing and strengthening great brands – as we did with IBM’s Think brand – and smoothly and efficiently integrating companies around-the-world. I am confident we will be successful with this process, and that our companies will not only maintain our current momentum in the market, but also build a strong foundation for the future.”

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

“As part of Lenovo, Motorola Mobility will have a rapid path to achieving our goal of reaching the next 100 million people with the mobile Internet. With the recent launches of Moto X and Moto G, we have tremendous momentum right now and Lenovo’s hardware expertise and global reach will only help to accelerate this,” said Dennis Woodside, CEO, Motorola Mobility.

The release above says that Google will maintain control of most of the patent portfolio. The quote from CEO Dennis Woodside suggests that he’s going to remain with Motorola. I’m sure he’s receiving significant incentives to do so.

The structure of the transaction is pretty convoluted, a mix of cash and stock to be paid over time. One would think that Lenovo could just buy it outright for cash. But perhaps not.

Related Topics: Channel: Mobile Marketing | Google: Acquisitions | Google: Android | Google: Mobile

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About The Author: is a Contributing Editor at Search Engine Land. He writes a personal blog Screenwerk, about SoLoMo issues and connecting the dots between online and offline. He also posts at Internet2Go, which is focused on the mobile Internet. Follow him @gsterling.

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