Google Sells Motorola to Lenovo for USD 2.91 bn

After 22 months of being together, search engine giant Google has decided to part ways with Motorola by entering into an agreement to sell it to Lenovo for USD 2.91 billion, the company announced Wednesday.

Google will keep the "vast majority" of around 17,000 patents it acquired when it bought Motorola in 2012 for USD 12.5 billion.

Google has struggled to compete in the cut throat phone-hardware business—its share of the world-wide smartphone market fell to about 1% last year from 2.3 per cent a year earlier, according to research firm IDC.

Google's stock was up over 2 per cent in after-hours trading shortly after the announcement.

Motorola has been running semi-independently from Google since the acquisition went through.

Last year, Motorola released its first flagship phone, the Moto X, since becoming a Google company.

The Moto X was well-reviewed, but it's unclear how many were sold.

Motorola has steadily been dropping the Moto X's price since the launch last fall.

In Q3 2013, Motorola revenues stood at USD 1.18 billion, down from USD 1.78 billion for the same quarter a year ago.

Google will report earnings for Q4 2013 on Thursday afternoon.

The deal also signals the rising ambitions of Lenovo, which is seeking to be a bigger player in the global technology market.

The purchase of Motorola will probably also put to rest rumours of Lenovo purchasing BlackBerry, at least for the time being, experts feel.

The deal has yet to be approved in the US or China, and this usually takes time.Google had earlier sold off Motorola's cable box business (the home division) for USD 2.5 billion. 

The move is expected to provide the Chinese company a firm foothold in the global handset market dominated by the likes of Apple and Samsung.

This is Lenovo's second major deal in a week. On January 24, Lenovo had said it would acquire IBM's low-end server business for USD 2.3 billion.

The purchase price of about USD 2.91 billion, includes USD 660 million in cash and USD 750 million in Lenovo ordinary shares (subject to a sharecap/floor), Lenovo said in a statement.

The remaining USD 1.5 billion will be paid in the form of a three-year promissory note, it added.

"The acquisition of such an iconic brand, innovative product portfolio and incredibly talented global team 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," Lenovo Chairman and CEO Yang Yuanqing said.

The deal, expected to close in late summer or early fall of this year (subject to conditions), will help Lenovo gain a strong market presence in North America and Latin America, as well as a foothold in Western Europe to complement its strong, fast-growing smartphone business in emerging markets around the world, the company said.

Both Lenovo and Motorola have a significant presence in India.

Lenovo is the second largest PC vendor in India with 13.6 per cent share in July-September 2013 quarter.

In 2005, the USD 33.9 billion-Lenovo group bought IBM's personal computer division. Since then, it has become one of the top PC makers globally.

Under the deal, Google will maintain ownership of the vast majority of the Motorola Mobility patent portfolio, including current patent applications and invention disclosures.

Lenovo will have access to about 3,500 technical and other resources across 33 locations globally and a broad product portfolio covering premium (Moto X and Droid series) as well as value segments (Moto G).

Motorola was expected to launch the Moto G in India in February.

Lenovo will receive a licence to this portfolio of patents and other intellectual property along with an additional over 2,000 patent assets. It will also get the Motorola Mobility brand and trademark portfolio.

In the last 2-3 years, Chinese handset makers like Huawei, ZTE and Lenovo have leapfrogged into the top ranks of global smartphone tally, heating up competition.

According to IDC, after Samsung and Apple, Huawei stood at the third spot with with 48.8 million units and 4.9 per cent share of the global smartphone market.

Lenovo, which is a fairly new player in the smartphone segment, had a 4.5 per cent share, standing at the fifth slot.

In a blog post on Wednesday, Google CEO Larry Page said the agreement will enable the US-based tech giant devote its energy to "driving innovation across the Android ecosystem, for the benefit of smartphone users everywhere."

"This does not signal a larger shift for our other hardware efforts. The dynamics and maturity of the wearable and home markets, for example, are very different from that of the mobile industry. We’re excited by the opportunities to build amazing new products for users within these emerging ecosystems," he added.