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Google sells Motorola Mobility to Lenovo

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MGoogle has sold its Motorola Mobility operations to Lenovo for $2.9b. Google bought the company for $12.5b in May 12. In 2012 they spun out Motomola Home division for $2.3b and they have sold off some manufacturing assets too. But the original deal was really justified by the batch of 17,000 patents that Google much needed to ward off attacks from others for its Android products. These are NOT part of the sale to Lenovo.  Earlier this week Google did a croos-licencing deal with Samsung to protect them against patent disputes.

The patent bit made great sense back in 2012. Whether these patents were worth c$7b is questionable though. The hardware bit made less sense. It seemed more “Apple is our major competitor for operating systems for smartphones. They make their own hardware. So we should too”. Given that the hardware bit has fast become a low (or no) margin commodity business, that logic looks rather suspect now. Google has had great success with Android leaving the manufacturing/low margin bits to others like Samsung.

This is the second big purchase within a week for Lenovo. See IBM confirms sale of X86 server business to Lenovo for $2.3b on 23rd Jan 14. In 2005 Lenovo had bought IBM’s PC business. Lenovo has done an excellent job with that PC business. Turning the Motorola loss-making division might be a more difficult task. But it certainly puts Lenovo firmly on the map. It will be the world’s third largest smartphone maker after Samsung and Apple. Motorola puts them on the map in the US too.

Lenovo shares dropped 8% on the news. It will be interesting to see what happens to Google when the markets open. Bluntly, it looks like a good deal for Google. Lenovo will give Google a great entre into the all important Chinese market for Android. And free them of an operation which increasingly looked like an unwelcome diversion for an otherwise fast-motoring business


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