Why Google sells Motorola Mobility to Lenovo

Why Google sells Motorola Mobility to Lenovo

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Lenovo shocked everyone as they announced their $3 billion acquisition agreement with Google for Motorola Mobility. Catch the details after the break!

Lenovo love Motorola

It was back in 2012 when Google announced their acquisition of Motorola Mobility for $12.5 billion. Since then, we saw the release of “the only smartphone assembled in the US” in the form of Moto X by Motorola, followed by the release of Motorola G. But, it wasn’t enough to give Motorola Mobility a positive cash flow.

The $3 billion deal might be just of a fraction of the original acquisition price Google paid for Motorola Mobility, but, Google gets to keep majority of Motorola’s patent portfolio. Lenovo on the other hand gets to acquire the Motorola Mobility brand and trademark, as well as about 2,000 patents that comes with it.

The acquisition is of course still subject to court approval for satisfaction of regulatory requirements, customary closing conditions and the like. But when approved, Lenovo will pay $1.41 billion at close in cash and ordinary shares, while the remaining balance of $1.5 billion will be paid on a three-year promissory note.

Currently, Motorola Mobility is the #3 Android smartphone manufacturer in the US and #3 manufacturer overall in Latin America, while Lenovo is the #1 PC maker in the world, based on recent study.

With that being said, we can’t help but wonder on what Google’s intentions are for selling the all American brand Motorola Mobility, after just 19 months of acquiring the company. True to form, despite the unveiling of the Moto X back in August, Google’s Motorola Mobility unit recorded losses to up to $248 million during Q3. This made different analysts shake their heads with Google’s decision to acquire Motorola Mobility, even from day one.

To say that revenue loss made Google decide to sell Motorola Mobility to Lenovo is an easy one, because the truth is, there is more than just that. During Google’s 19 month acquisition of Motorola Mobility, they got to acquire and expand their patent portfolio with the latter company’s existing and even pending patents, “supercharging” the Android ecosystem, especially when there’s a lot of patent wars happening.

There’s also an angle that maybe, Google just wanted to increase Android’s smartphone market share when they acquired Motorola Mobility. Since the introduction of Moto X and Moto G, it has always been priced as affordable (priced at just $329 and $179 respectively) as they possibly be, to make people jump to Android more, which it did. By the end of 2013, Android’s smartphone marketshare jumped to 78.9% from 2012’s 68.8%.

2013 smartphone market shareDuring the 19 months, Google also sold the Motorola Home division to cable and broadband equipment supplier Arris Group for $2.35 billion ($2.05 billion in cash, $300 million in stock making Google 15.7% owner of Arris Group) back in December 2012. And lastly, with the announcement of Lenovo acquiring Motorola Mobility from them, Google’s shares went up to 2.6% or $28.28 to $1,135.20 per stock–a good news for every one in Google.

With all these stated above, maybe, just maybe, it was a very smart move for Google to acquire Motorola Mobility and sell it 19 months after to Lenovo, after all.

Founding-Editor of Cebu Tech Blogger where he shares insights in eCommerce, Digital Marketing, Ad Ops, Tech, Startups, Technopreneurship, Life Goals and Hacks. He's the brainchild and ninja of a Cebu-based digital agency, TekWorx.Digital, with ventures TekWorx, (eCommerce and Digital Marketing), AdWorx (Outsourced Ad Ops for Publishers) and BlogWorx (full-fledged Blog Development service). Read his Full Curriculum Vitae. For training and consultancy, services, speaking engagements, blog partnerships or media invites, click here. Alternatively, get in touch with him on Messenger.

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