Lenovo, the world’s largest PC maker recently bought Motorola from Google for $2.9 billion. The deal consisted of $660 million in cash and $750 million in Lenovo shares, and the remaining $1.5 billion was paid in the form of a three-year promissory note. Both companies believe that the acquisition strategy is positive move for both of them.
Google initially bought Motorola for $12.5 billion in 2012 mainly because of its patent portfolio. However, the acquisition proved to be a bad move as it did not ward off lawsuits and did not bring in the expected royalties. Furthermore, Google’s Android group was not comfortable with Motorola since it was also a competitor. For the past years, Motorola has suffered losses, and in its latest end of quarter results, operating loss was posted at $248 million. Google is convinced that Motorola is a better fit for Lenovo because of its fast growing smartphone business. On Google’s end, its CEO, Larry Page believes that with its unloading of Motorola, it can better focus on its Android ecosystem which will benefit smartphone users worldwide.
For Lenovo, the deal brings with it the acquisition of Motorola’s 2,000 patents. Yang Yuanqing, Lenovo’s CEO is convinced that it will be able to turnaround Motorola within a year. The move will help Lenovo penetrate the US smartphone market and eventually make the company a strong competitor in the global smartphone business. Lenovo hopes to replicate the success of IBM’s ThinkPad business, when it purchased it in 2005. Lenovo believes that its marketing strength will be a good support to Motorola’s innovative devices.
Since the acquisition is less than a month old, one cannot conclude yet whether the strategy will be successful. But given the established track record of Motorola in the wireless industry, and with Lenovo’s marketing expertise and growing smartphone business, one thinks that the deal is a win-win strategy.
Cheng, Roger. "Google sells Motorola unit to Lenovo for $2.9B." 29 January 2014. cnet.com. Web. 18 February 2014 <http://news.cnet.com/8301-1023_3-57618023-93/google-sells-motorola-unit-to-lenovo-for-$2.9b/>.
Kastrenakes, Jacob. "Google sells Motorola to Lenovo for $2.91 billion." 29 January 2014. theverge.com. Web. 18 February 2014 <http://www.theverge.com/2014/1/29/5358620/lenovo-reportedly-buying-motorola-mobility-from-google>.
Page, Larry. "Lenovo to acquire Motorola Mobility." 29 January 2014. googleblog.blogspot.com. Web. 18 February 2014 <http://googleblog.blogspot.com/2014/01/lenovo-to-acquire-motorola-mobility.html>.