It apparently hasn’t taken long for Google to tire of being in the handset business.
It has struck a deal to sell its Motorola Mobility handset divison to Lenovo for US$2.9 billion. Google purchased the division in 2011 for US$12.5 billion.
“With a strong PC business and a fast-growing smartphone business, this agreement will significantly strengthen Lenovo’s position in the smartphone market,” the company said in a statement. “In addition, Lenovo will gain a strong market presence in North America and Latin America, as well as a foothold in Western Europe, to complement its strong, fast-growing smartphone business in emerging markets around the world.”
Google retains ownership of most of the valuable Motorola patents, giving Lenovo a licence to use them. Lenovo also gets about 2,000 patent assets.
This comes right after Lenovo struck a deal with IBM to buy its x86 server business. If the Motorola deal goes through Lenovo will become a true end-to-end IT hardware supplier.
“Buying Motorola Mobility is a much quicker way for Lenovo to access the premium smartphone market with a leading Google Android (not forked Android) offering – than trying to do it with their existing design teams and brand reach,” said Forrester Research analyst Frank Gillett. “Using Motorola, just as Lenovo used the IBM ThinkPad brand, to gain quick credibility and access to desirable markets, and built critical mass makes a lot of sense.”
The deal is logical, as Motorola has been a drag on Google’s bottom line. For a largely software company, the handset business must have been alien, despite the fact that Google provided the Android operating system for many devices.
But as many analysts pointed out at the time, Google would have trouble wearing two hats: As a supplier of an operating system to a number of leading companies (Samsung, Sony, LG, Huawei and others) and the owner of a handset that competes with them.
Not that it bought Motorola at the top of its brand value. And many analysts have noted that Samsung and Apple are almost the only profitable handset makers in the world.
The also note that the Android world is fracturing, with carriers unenthusiastic about carrying handsets with a number of versions of Android and having to rely on Google for updates. At the same time their customers are buying apps from the Google Play store, with no carrier revenue. That’s why some carriers are interested in new operating systems like Tizen (backed by Samsung and Intel) . The Tizen OS will officially debut at next month’s Mobile World Congress in Barcelona.
However, it is doubtful North American carriers want another OS to support. While they want competition, they are already doubtful about backing BlackBerry and Windows Phone devices because of their small market share.
Lenovo may focus Motorola on the Chinese market. However, in a statement the company maintains that it gains “a strong market presence” in North America with the purchase, as well as a foothold in Europ.
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.” Lenovo CEO Yang Yuanqing said in a statement.growing mobile space.
“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 has a proven track record of successfully embracing and strengthening great brands – as we did with IBM’s Think brand – and smoothly and efficiently integrating companies around-the-world. I am confident we will be successful with this process, and that our companies will not only maintain our current momentum in the market, but also build a strong foundation for the future.”