Google sells unprofitable Motorola to Lenovo

30 January 2014
By Tereza Pultarova
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Google's acquisition of Motorola was said to be unprofitable

Google's acquisition of Motorola was said to be unprofitable

Google has sold Motorola Mobility’s smartphone business it acquired two years ago to Lenovo, pulling a plug on an unprofitable venture that has cost billions.

While the US technology giant will make $2.9bn (£1.7bn) for selling the smartphone maker to the Chinese technology corporation, Google itself bought Motorola for $12.4bn (£7.5bn) in 2012 in the biggest acquisition in its 15-year history.

For Lenovo, the move represents another step in the company’s strategy to expand its business and become a major player in the global smartphone market. Lenovo has already been successfully selling smartphones in its home country, but eyes the US and Latin American market.

"We will be going from an emerging market player to a worldwide player in smartphones," Lenovo chief executive Yang Yuanqing said.

Buying Motorola will enable Lenovo to join Apple as the only major technology companies with global product lines in PCs, smartphones and tablets, putting Lenovo in a better position to become a one-stop shop for companies to buy all their devices from the same vendor. Lenovo plans to keep both smartphone brands, selling under Motorola's name in developed markets and under its own in developing countries where it already is established, officials said.

Earlier this month, Lenovo announced another high-profile deal, buying a major piece of IBM's computer server business for $2.3bn dollars (£1.4bn).

Google’s main motivation to buy Motorola back in 2011, already in loss at the time of the purchase, was its 20,000 mobile patents, providing Google with legal protection for its widely used Android software for smartphones and tablet computers.

The Motorola patents were valued at $5.5bn (£3.3bn) at the time Google took over, according to regulatory filings. While Google is keeping some of the patents, about 2,000 of those will go to Lenovo together with the smartphone business.

Google already got rid of Motorola’s set-top operations by selling it to Arris Group for $2.35bn dollars (1£.42bn) last year.

Most investors considered Motorola as an unnecessary drain on Google's profit, a perspective that was reflected by Wall Street's reaction to the sale. Google's stock gained 28.08 dollars, or 2.5 per cent, to 1,135 dollars in extended trading.

A mobile pioneer, Motorola Mobility had its last big hit with the Razr flip phone, which came out in 2004. Its product line became outmoded after Apple released the iPhone in 2007, unleashing a new era of touch-screen phones. Motorola has not been able to catch up yet, even though last summer's Moto X received positive reviews.

Motorola's losses are likely to dampen Google's earnings at least for the first half of this year because it is expected to take six to nine months before the proposed sale gets the necessary approvals from regulators.

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