Google confirmed today that it is giving up trying to compete with smartphone makers, selling its Motorola handset business to China’s Lenovo for $2.91 billion. Less than 3-years after buying it for $12.5 billion.
“The smartphone market is super competitive, and to thrive it helps to be all-in when it comes to making mobile devices. It’s why we believe that Motorola will be better served by Lenovo—which has a rapidly growing smartphone business and is the largest (and fastest-growing) PC manufacturer in the world,” admitted Google CEO Larry Page in a blog post today.
Instead the Internet giant said it will focus on developing the Android software for smartphones and retain the vast majority of Motorola’s patents, which it will continue to use to defend the entire Android ecosystem, added Page.
How Google raked in billions in the Motorola-saga
On the face of it, that’s more than $9.5 billion for a collection of patents that has not proven to be very effective, especially against Apple.
However, on the bright side, when Google acquired Motorola it also inherited a cash pile of $3.2 billion, as well as $2.4 billion in deferred tax assets, for a net acquisition cost of $6.9 billion.
Net-net, after the Lenovo deal, Google spent less than a billion dollars for patents that it originally estimated was worth $5.5 billion. Admittedly, Motorola also ran up close to $2 billion in operating losses, but that still leaves Google with a virtual profit of $3 billion!
Motorola to help Lenovo enter the U.S. and other mature markets
For Lenovo, the Motorola acquisition brings a major mobile phone brand, worldwide channels outside its primary market in China and deep relationships with carriers like AT&T and Verizon. ”And it gets an engineering staff that knows phones for worldwide sales,” said analyst Jack Gould. A win-win deal after all.