Google is selling the Motorola Mobility handset business to China’s Lenovo at a fraction of the price it paid for the company less than two years ago. But Google will keep most of Motorola’s patents.
Lenovo will pay $2.91 billion for Motorola’s mobile device unit, which Google bought along with Motorola Mobility’s intellectual property for $12.5 billion in 2012. The deal marks the end of a busy month for Lenovo, which said last week that it will buy IBM’s low-end server business for $2.3 billion.
Under Google’s leadership, Motorola has introduced the first smartphone to be made in America, the customizable Moto X. It also launched the Moto G smartphone, which just recently hit the U.S. market. Both of these smartphones have been somewhat lackluster sellers, and Google has kept the Motorola brand quite separate from its own Nexus mobile device brand. The Nexus smartphones are manufactured by South Korea’s LG but are branded as Google smartphones.
Lenovo and LG are both ranked in the top five global smartphone manufacturers, but with this deal Lenovo leapfrogs LG as well as the other big non-Samsung Android player, Huawei. “As a result of this new deal — assuming it is approved by US, Chinese and other authorities — Lenovo-Motorola becomes instantly the world’s 3rd largest smartphone vendor by volume, behind Samsung (32%) and Apple (15%),” said analyst Neil Mawston, executive director of Strategy Analytics. The firm calculates Lenovo’s 2013 global smartphone market share at 4.6%, based on 45.5 million smartphones shipped.
Lenovo’s total mobile phone sales were roughly $2.6 billion during the six months ending in September. This fall the company reportedly tried to buy BlackBerry’s handset business, but Canadian regulators are thought to have blocked those overtures. In November, Lenovo told investors that it wants to grow through more acquisitions.
For Google, the deal with Lenovo means it will be able to focus its handset initiatives on the Nexus brand, while maintaining the Motorola patents. Those patents can give Google leverage in lawsuits or potential lawsuits – if competitors demand excessive licensing fees for intellectual property, Google has the power to do the same.
“If you’re Google and you want Android to be the leading OS globally you need to make sure that there’s not a cost impediment that basically means that operators and consumers will choose something other than Android,” said nTete Group founder Chris Hare, who believes the Motorola patents were Google’s primary motivation for buying Motorola Mobility. Today’s news supports that argument, as Google is parting with the device business for less than 1x annualized revenue.
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