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MrsMith
Jan 29, 2014

Why would Google sell Motorola to Lenovo?

There are reports that Google is looking at selling Motorola to Lenovo for around $3 billion, when it paid around $12 billion just over 2 years ago. This seems like the loss of a lot of money, even for Google. Why would Google take such a big loss and sell a company it has only owned a couple of years for a fraction of the acquisition cost?

jimlynch
02/05/2014
Google Still Wins by Selling Motorola for Cheap
http://www.wired.com/business/2014/01/google-moto/

"But Google still comes out ahead.

When Google bought Motorola, the deal made a lot more sense than it does in hindsight, and the web giant hasn’t lost nearly as much as the difference between what it bought and sold Motorola for would suggest. For one, Google pocketed a fair amount of cash when it sold a portion of Motorola at the end of 2012.

And as it sold the bulk of the company to Lenovo, it retained many of the patents it acquired in purchasing Moto — an extremely valuable collection of intellectual property. But most importantly, Google is now a sleeker, stronger company. Larry Page and his brain trust have rightly realized that Google is much better off staying a software pioneer — not a hardware also-ran."
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Quinn
01/31/2014

Number6 got it right. Google bought Motorola's mobile phone business in order to acquire Motorola's intellectual property, and before it sold the company, it stipped out and retained all of the intellectual property (patents, etc.) that it needed for its own business. In other words, the Motorola that Google sold to Lenovo was a slimmed-down version of the company that Google had previously purchased. The difference between the price Google paid for Motorola and that price it got for selling the stripped-down version represents Google's valuation of the Motorola intellectual property that it retained for itself. I believe that Google's actions were quite shrewd.

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Christopher Nerney
01/30/2014
Google's revenue mostly comes from online ads. It makes little to nothing on Android, and probably realized it wasn't going to make any money selling handsets and competing with Samsung and other Android manufacturers. Google may be more interested in Chrome OS than Android going forward.
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Number6
01/30/2014

Take note of one thing Lenovo isn’t getting - patents. The biggest threat facing Google isn’t whether or not it can function as a hardware company and make a few million from selling Android phones, it is getting hit with endless patent suits and potentially losing billions of dollars, even if the claim is questionable. Think about it, just this week they were ordered to pay some patent trolls that bought some old Lycos patents something like 1.5% of their AdSense revenue (I may be off half a percent or so). That is serious, serious money. So, yes, Lenovo can make Motorola braded devices now, but Google kept Motorola’s patent portfolio for itself, which could have paid for the acquisition on its own without a single device ever having been built.

 

In addition, Google was competing against its partners, and judging from the Nexus program, the company has at least 3 major manufacturers that are willing to work with them - Samsung, LG and HTC. Why create friction by competing against them. As the earlier post by nedhedge (sorry if I mispelled it, I can't see it while typing my answer) noted, Google makes it’s money off of ad revenue, not hardware sales.

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nedhege
01/30/2014

Google  makes money with software and advertising, period. Cell hardware is destined to be a mere commodity at lowest price - and its got a long way to go, all negative. Yes, its a "big" loss, but there is plenty more cash where that came from. Better to cut your non-core functions and reduce the distractions.

 

The Motorola purchase was always a riddle. Google never made a strong case for the purchase. In the end, the real question is "why did they buy it in the first place? Probably the decision was not sufficiently vetted - or, gulp, there wasnt even an established vetting process - hard as that is to swallow as the rationale for such a large purchase.

 

Anyway, Google's still quite young. This disruptive technology company will be sorting things out for some time yet.

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