Why Google Is Taking a $9.5 Billion Hit on Selling Motorola to Lenovo

Less than 2 years ago, Google caused loads of puzzled looks when it bought Motorola, the mobile device hardware manufacturer. It didn’t look like an obvious fit.

And the much more head-scratching news is that Google is now selling Motorola to Lenovo for nearly $10 billion lower than what it paid. Google purchased Motorola in 2012 for $12.5 billion  and is now selling it for $2.91 billion.

But as you look closer, it can be a higher deal for Google than it sort of feels — and an awful lot for Lenovo.

As component to the deal, Google will retain ownership of Motorola Mobility’s patent portfolio. Lenovo would be granted a license to those patents and other intellectual property still owned by Google after the sale.

Why It’s Good for Lenovo

Lenovo gets 2,000 patent assets and the Motorola Mobility brand and trademark portfolio, said Google and Lenovo in a joint statement.

The acquisition of Motorola Mobility expands Lenovo’s mobile profile. The corporate will now own the Motorola Moto G, Moto X, and Ultra DROID series of smartphones. Lenovo may even take control of Motorola’s “product roadmap” sooner or later.

By acquiring Motorola Mobility, Lenovo enters the North and Latin American smartphone markets wit a powerful brand. Both companies claim Motorola Mobility is the third largest company in those markets already. Lenovo hopes Motorola might actually help the corporate establish itself inside the Western European smartphone market too.

In a prepared statement, Lenovo chairman and CEO Yang Yuanqing said:

“The acquisition of such an iconic brand, innovative product portfolio and incredibly talented global team will immediately make Lenovo a robust global competitor in smartphones.”

Why It’s Good for Google

For Google this implies a lift within the selection of phones using the company’s Android operating system in the marketplace. Google CEO Larry Page says selling Motorola to Lenovo allows his company to target developing the Android mobile operating system. And as Quartz observes :

“It might sound like Google is taking a $10 billion bath at the sale of Motorola to Lenovo. But Motorola has already helped Google save what could amount to billions of greenbacks on its taxes, which softens the blow. And there’s otherwise to have a look at this: Google has created a competitor to Samsung that’s headed by an ex-Googler (for now) so one can now visit a firm, Lenovo, that has proved itself quite in a position to succeeding within the low-margin hardware business.”

Image: Wikipedia

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