Google Sells Motorola to Lenovo
Google has sold Motorola Mobility to Lenovo for $2.91B, and keeps most of the patents in their portfolio while Lenovo gets 2,000 patents. Google may lose money on this deal but the Android ecosystem benefits.
Google bought Motorola Mobility for $12.5B back in 2011, indicating that they were highly interested in acquiring it for the 17,000 patents it came with plus another 7,500 patents in the process of being granted. At that point, the move was seen by some as a threat to the Android ecosystem, Google being both the maker of Android and becoming a hardware manufacturer. Google declared that they will treat all partners the same and Motorola will be just another Android licensee, according to CEO Larry Page.
After two and a half years the Android ecosystem is thriving, Google’s operating system being present on 81% of smartphones shipped worldwide during Q3/2013, according to an IDC study. It seems that Google has played fair with all hardware manufacturers, and now they have even more reasons to do so because they announced yesterday selling Motorola Mobility to Lenovo for $2.91B. Google will retain most patents, Lenovo getting only 2,000 of them. Also, the Advanced Technology and Projects group and its patents are not part of the deal, and will be integrated into the Android team.
Some analysts noted that Google has taken a “a hit of about $7 billion”, considering that they sold the set-top box division for $2.35B. Others have a different opinion, considering that Google made a good deal: losses were initially counted at around $3.2B, and Google valued the patents at $5.5B back in 2012, so theoretically they don’t lose money. But that holds true only if the patents are worth as much as Google initially thought. And, the patent litigation processes so far have not brought much cash to Motorola. Currently, Microsoft has to pay only “$1.7 million in annual royalties for using Motorola's standards-related Wi-Fi and video-encoding patents in every Xbox 360 and Windows 7 PC sold, rather than the $4 billion Motorola had originally demanded.” But Page still promises to continue to use the patents to “defend the entire Android ecosystem.” It remains to be seen how successful they will be.
The Android ecosystem will probably benefit from this deal, strengthening Lenovo’s position in their competition with Samsung which accounted for 39.9% of all Android shipments during Q3/2013. It is not recommended for a manufacturer to dominate a market because chances are the pace of innovation slows down and the prices go up. Lenovo is currently the leader in the PC market, and it has recently acquired IBM’s server business for $2.3B.
Maybe Google realized they can't compete with Samsung
Tom Gilb & Kai Gilb Jan 26, 2015