In the end, Larry Page tacitly admitted that the critics were right all along: In buying Motorola Mobility, Google created an irresolvable conflict with its Android partners. Today, it ended that conflict by selling Moto to Lenovo for a paltry $2.9 billion, which becomes a lot more paltry when you realize that only $660 million is in upfront cash.
Page wrote in a post on Google’s official blog:
We acquired Motorola in 2012 to help supercharge the Android ecosystem by creating a stronger patent portfolio for Google and great smartphones for users… But the smartphone market is super competitive, and to thrive it helps to be all-in when it comes to making mobile devices. It’s why we believe that Motorola will be better served by Lenovo—which has a rapidly growing smartphone business and is the largest (and fastest-growing) PC manufacturer in the world. This move will enable Google to devote our energy to driving innovation across the Android ecosystem, for the benefit of smartphone users everywhere.
The Moto venture has been a major flop for Google. The company paid $12.5 billion for Moto and has absorbed more than a billion dollars in additional losses. It did receive $2.5 billion from Arris for the Motorola Home set top box division and will retain the bulk of the Moto patent portfolio. But it’s not getting much from Lenovo: $660 in cash, $750 in Lenovo common stock, and the balance in a three-year promissory note (in other words, Google is lending Lenovo the money to take Moto off its hands.) When the deal closes, and it requires regulatory approval in both the U.S. and China, Google will be taking a monster write-off.
But it’s probably worth the price for Google to simplify its relationship with the complex world of Android. The deal only made sense in the first place if Google were willing, at a minimum, to make Moto first among equals in the Android OEM business. But Google was never willing to make that commitment–or to risk an open break with Samsung and other Android OEMs. That left Moto as just another struggling Android OEM and while it made some nice products, particularly the high-end Moto X and the Moto G for lower-income markets, it failed to gain much market share of get anywhere near to profitability.
Google, meanwhile, has been trying to move closer to its Android partners and, particularly, to ease a badly strained relationship with Samsung. It recently concluded a broad patent cross-licensing agreement with Google, an arrangement that makes more sense now that Google is keeping the patents but leaving the phone business.
For Lenovo, meanwhile, the move is risky but a clear sign that the Chinese-American hybrid is on the march. Earlier this week, the company reached a deal to buy IBM’s x86 server business for $2.3 billion (mostly cash.) Lenovo first rose from obscurity by purchasing IBM’s PC operations in 2005 and in recent quarters, it has been ejoying strong market share growth in a very soft PC market.