Google has sold its Motorola Mobility subsidiary to Lenovo for $2.91 billion. As part of the deal, Lenovo will garner the Motorola brand, Motorola patent portfolio, and line of current and future Motorola products.
Lenovo says it plans to turn itself into a strong global competitor in the smartphone market. Meanwhile, Google will maintain ownership of the "vast majority" of the Motorola Mobility patent portfolio, including current patent applications and invention disclosures.
“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,” said Yang Yuanqing, chairman and CEO of Lenovo.
“We are confident that we can bring together the best of both companies to deliver products customers will love and a strong, growing business.”
Lenovo will be paying the $2.91 billion purchase price with $1.41 billion paid at close, comprised of $660 million in cash and $750 million in Lenovo ordinary shares. The remaining $1.5 billion will be paid in the form of a three-year promise.
“Lenovo has the expertise and track record to scale Motorola Mobility into a major player within the Android ecosystem," said Larry Page, CEO, Google. "This move will enable Google to devote our energy to driving innovation across the Android ecosystem, for the benefit of smartphone users everywhere.”
“As part of Lenovo, Motorola Mobility will have a rapid path to achieving our goal of reaching the next 100 million people with the mobile internet," said Dennis Woodside, Motorola Mobility CEO. "With the recent launches of Moto X and Moto G, we have tremendous momentum right now and Lenovo’s hardware expertise and global reach will only help to accelerate this.”
It's a big deal, considering Google purchased Motorola Mobility for $12.5 billion in August 2011. Even though Motorola shipped the Moto X and Moto G under Google, the handset arm lost money for the company. Last quarter it reported a $248 million loss, less than -21 per cent of Motorola Mobile segment revenues, and in the year ago quarter showed a $192 million loss.
In a conference call Wednesday afternoon, Yuanqing said Lenovo would bring Motorola Mobility to profitability and will challenge global smartphone leaders over the next few years. The company saw it as a logical purchase because of Motorola's positioning in North America and Latin America, which will help the China-based Lenovo quickly grow its smartphone business.
Lenovo said the Motorola brand would be used in North America, Latin America and Europe, and the Lenovo brand will be used in China and emerging markets. Lenovo wouldn't say for sure if the majority of Motorola manufacturing would stay in the US, and said it would look at what's most effective. Lenovo wants eventually to sell 100 million smartphones a year, Yuanqing said.
Following the deal's announcement, Google's stock rose more than 2 per cent in extended trading Wednesday afternoon.
Google will be holding its quarterly earnings call Thursday afternoon, where we suspect we'll hear plenty more about Google's reasoning behind selling.