Updated: Lenovo to Buy Motorola Phone Division from Google for $3B
At the top of the hour, Reuters posted a tweet that brought the Internet to a screeching halt:
BREAKING NEWS: Lenovo is nearing a deal to buy the Motorola cell phone division from @Google for close to $3 billion, sources tell @Reuters
— Ernest Scheyder (@ErnestScheyder) January 29, 2014
That’s right: Google’s own phone business, Motorola Mobility, is apparently going to be acquired by Chinese computer and smartphone maker Lenovo for a reported $3 billion. A post on the Verge about the news points out that when Google bought Motorola’s phone division in early 2012 (having announced it in August 2011), it had paid $12.5 billion, apparently interested in the phone-maker’s extensive portfolio of patents.
With such a disparity in the purchase price and the sale price, one has to wonder whether Google is bundling Motorola’s patents along with the rest of the brand. So far, that hasn’t been addressed by any of the reports, but it wouldn’t be surprising if Google held onto the primary reason for acquiring Motorola Mobility in the first place.
But even with the retention of the patent portfolio, it seems that Google was never too terribly interested in owning an OEM. Despite the recent push with the Moto X, the fact that the Nexus line of smartphones came from HTC, Samsung, and LG—and never Motorola—would seem to indicate a relative lack of faith in Motorola’s value as a device maker.
A Reuters article fleshing out the story explains that Lenovo’s interest in Motorola Mobility is part of an effort to compete more directly with Apple in the United States. And considering that rumors are swirling of Apple’s own efforts to gain traction in China—with repeated reports of a phablet-sized iPhone 6, which are big business in that territory—it makes sense that Lenovo would look to Motorola’s brand-name recognition and well-reviewed line of handsets to give it a leg-up here and abroad.
If the deal goes through—and all signs point to that happening within the next couple hours as day breaks in China—I’m wondering how this will affect the various projects Motorola is tackling, specifically Project Ara, the company’s modular smartphone project that could have a lot of potential if realized. Would Lenovo be interested in Project Ara’s continued existence? Or is Lenovo more concerned with acquiring a brand and a smartphone-making infrastructure? What will happen to the division’s employees—some of whom were already laid off last March.
This changes the smartphone landscape a bit, and it’ll be interesting to see how it all plays out. Stay tuned for updates as they come.
Update
Google has confirmed Lenovo’s purchase of Motorola Mobility with this press release. Here are the financial details of the transaction:
“The purchase price is approximately US$2.91 billion (subject to certain adjustments), including US$1.41 billion paid at close, comprised of US$660 million in cash and US$750 million in Lenovo ordinary shares (subject to a share cap/floor). The remaining US$1.5 billion will be paid in the form of a three-year promissory note.”
As we’d suspected, “Google will maintain ownership of the vast majority of the Motorola Mobility patent portfolio,” which accounts for the almost ten billion dollar disparity between how much Google paid for Motorola Mobility back in 2012 and how relatively little money they’re selling it for now. However, Lenovo is still coming away with a portfolio of “over 2,000 patent assets,” which is certainly nothing to sneeze at.
Still no word on whether layoffs are coming or the fate of Project Ara. But I have a sneaking suspicion that Lenovo has little to no interest in promoting a modular smartphone. Hope I’m wrong on that one.