A colleague forwarded me a link to “Google sells Motorola unit to Lenovo for $2.9B”[1], with an additional comment “That's $9.5B less than what they paid for it.”.
Did someone lose on this deal? If yes, who?
· Google purchased Motorola mobility for $12.5B[2]. (Motorola mobility was a spin-off of Motorola’s consumer business units that included cable modem, set-top box and consumer mobile devices[3]).
· On Dec 19, 2012, Google sold cable modem and set-top box business to Arris Group for $2.35B.
· On Jan 29, 2014, Google announced sales of Motorola mobility to Lenovo for $2.91B.
· Motorola Mobility, when it was acquired by Google, had 17,000 patents, with 7,500 more patents pending. Only 2000 of these patents will go to Lenovo and rest will be retained by Google. Google had valued these patents at $5.5B. In order to put this valuation in perspective, consider July 2011 winning bid of $4.5 billion for 6000+ patents of Nortel[4]. That bid was won by a consortium of Apple, Microsoft and RIM. Google needs Motorola portfolio to counter patents acquired by Microsoft etc[5].
· Google is also retaining Advanced Technologies and projects unit[6]. This unit deals with cutting edge technologies such as ingestible technologies.
Looking at this data, Google appears to have lost nothing. Most probably, Google will use this transaction as a paper loss, adjust against its profits and reduce its taxes. So it will actually gain from this transaction.
In hindsight, it appears that Google’s primary interest in Motorola mobility was its patent portfolio. Google already has several cellphone manufactures on board with its Android operating system. Google would not have seen much value in owning its own mobile device business. Advanced technologies and projects unit was additional gravy Google got from that deal.
Lenovo also comes out as a winner. It had no presence in cell-phone market. Now it gets a reputed brand name and a reputed web property. It also gets 2000 patents and an established (though small) customer base.
I think actual loser is US economy. Motorola mobility had 19,000 employees[7] when it was created. In Q4 2013, employee count was down to 3,894. How many of these jobs will remain in US after Lenovo’s acquisition is anyone’s guess.
[1] Google sells Motorola unit to Lenovo for $2.9B
[2] Google agrees to acquire Motorola Mobility
[3] Motorola Mobility Launches as Independent Company
[4] Big bidding: Apple, Microsoft, RIM nab Nortel patents for $4.5 billion
[5] When patents attack Android
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