Google Still Wins as Motorola Transfer to Lenovo is Officially Complete

by Matt Klassen on October 31, 2014

It’s official: Google’s foray into the realm of the mobile handset vendor is over, the deal to sell its Motorola Mobility subsidiary to Lenovo finally closing yesterday. The transfer of Motorola Mobility to Lenovo marks the end of Google’s relatively short tenure in the hardware side of the mobile market; Lenovo paying Google $2.91 billion in the form of cash, shares, and a promissory note for most of Motorola, with Google retaining control over Motorola’s extensive patent portfolio.

When the news of this pending sale first broke at the beginning of 2014 some were quick to deem this entire saga a spectacular failure for the company that generally exerts unabated dominance over our lives, pointing out that Motorola’s resale value was a fraction of the $12.5 billion Google initially paid when it purchased the firm only two years ago.

But can we really judge the success of this endeavour on the sale price of Motorola Mobility alone? The only way to truly gauge the success of this transfer deal is to understand Google’s goals throughout, recognizing that its purpose in acquiring Motorola Mobility in the first place was not to become another Android competitor, but to stimulate the Android ecosystem towards better products and to secure some patent defence against the likes of Apple and Microsoft.

On both counts I would argue that Google has accomplished its mission, with the added bonus that with Lenovo Google has now added another strong player (not to mention another mobile ad distributor) to the Android family.

At the time of the initial announcement of the sale of Motorola, Google explained the decision in this way: “We acquired Motorola in 2012 to help supercharge the Android ecosystem by creating a stronger patent portfolio for Google and great smartphones for users. Over the past 19 months, Dennis Woodside and the Motorola team have done a tremendous job reinventing the company. They’ve focused on building a smaller number of great (and great value) smartphones that consumers love. Both the Moto G and the Moto X are doing really well, and I’m very excited about the smartphone line-up for 2014. And on the intellectual property side, Motorola’s patents have helped create a level playing field, which is good news for all Android’s users and partners.”

The short term infusion of cash, research, and development into Motorola aside, it was clear from the outset that Google was putting itself in a tough situation with its acquisition of the smartphone company, as suddenly Google stopped being the caretaker of the Android ecosystem, becoming instead a competitor alongside all its partners. Having accomplished its goals in securing a patent defence for Android and by helping to stimulate the Android brand, it’s really not surprising to see Google once again step back into the shadows.

While some were certainly surprised at Google’s abrupt divesture of its Motorola assets, it actually seemed to be the most likely course of events even when Google first acquired the newly formed Motorola Mobility. As I wrote more than two years ago regarding Google’s plans, “it might be just as likely that Google looks to offload some of Motorola’s assets, taking what it wants from the company and selling off the rest.”

In fact, analyzing Google’s initial purchase of Motorola Mobility, what’s interesting is that Google resold its hardware brand for almost the same price. As summarized by CNET writer Don Reisinger at the time, “Google says that $2.9 billion of the purchase price accounted for Motorola’s cash, while $730 million went to customer relationships and $670 million to other net assets.” {Italics mine} The largest percentage of Motorola’s overall value, and the key to the entire deal according to Google, therefore, was the $5.5 billion in “patents and developed technology.”

Given that Google retained the Motorola patents, helped stimulate the Android ecosystem, added another strong Android partner in Lenovo, while limiting the disruption to the Android family caused by the added competition from Google, I would say this entire saga has been a spectacular success for Google, it just may not seem so on the face of it.

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Written by: Matt Klassen. Follow by: RSS, Twitter, Facebook, or YouTube.

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