Google has agreed to sell Motorola to Chinese technology giant Lenovo Group (聯想) for US$2.91 billion, after a lackluster two-year effort to turn around the smartphone maker it bought for US$12.5 billion.
The deal ends Google’s run as a handset maker after its biggest-ever takeover, which was announced in 2011 and finalized in 2012.
It also provides Lenovo footholds in smartphone and tablet markets where it is eager to gain traction while acting as a peace offering to Samsung and other partners that make devices powered by Google-backed Android software.
“It is win-win,” analyst Tim Bajarin of Creative Strategies in Silicon Valley said. “Google keeps the patents and the research group, and they keep partners off their back, while Lenovo gets what they need to get into the US smartphone market.”
The deal comes just a week after Lenovo said it would buy IBM’s low-end server business for US$2.3 billion, giving it a platform to compete in that sector with US giants Dell and Hewlett-Packard.
However, Lenovo’s Hong Kong-listed shares dived 8.21 percent to HK$10.06 yesterday as investors were spooked about Motorola’s profitability.
Even under Google, Motorola failed to gain traction in a rapidly evolving smartphone market dominated by South Korea’s Samsung Electronics Co and US-based Apple.
Google and Lenovo said the deal was good for all involved.
“Lenovo has the expertise and track record to scale Motorola Mobility into a major player within the Android ecosystem,” Google chief executive Larry Page said in a statement.
Lenovo chairman and chief executive Yang Yuanqing (楊元慶) said the deal “will immediately make Lenovo a strong global competitor in smartphones. We will immediately have the opportunity to become a strong global player in the fast-growing mobile space.”
The Chinese firm was the fifth-largest smartphone maker in the fourth quarter, with a 4.5 percent market share, barely behind fellow Chinese maker Huawei (華為) and South Korea’s LG Electronics, according to a report by research firm IDC.
Ramon Llamas, at IDC, said that with Motorola added in, Lenovo would be No. 3 globally and gain other benefits.
“Lenovo gets an all-important foothold in North America and in Latin America, and to a lesser extent Western Europe,” Llamas said. “Motorola has distribution, it has brand recognition, Lenovo does not have that.”
Lenovo became best known in the US after buying IBM’s PC business in 2005, and used that to become the world’s biggest PC maker last year.
However, JPMorgan analysts said in a note that Motorola is deeply unprofitable with losses approaching US$1 billion and questioned whether Lenovo could get the business in the black.
While Google would be taking a loss on the sale, it did spin off the Motorola Home division for US$2.3 billion in 2012 and sold off some of its manufacturing facilities.
Some analysts said one of Google’s main interests in Motorola would be the portfolio of 17,000 patents.
“Google got what they wanted and needed from Moto — they got patents, engineering talent and mobile market device insight,” tech analyst Jack Gold said.
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