In a deal that has been leaving many scratching their heads, Google, after two of owning the brand, has decided to sell off Motorola to Lenovo. The agreement will give Lenovo a bigger position into the North and Latin American markets and will set them up for presence in Western Europe.
Google has stated that the estimated price sits at $2.91 billion, which will include $1.41 billion being paid upon closing of the deal, with $660 million in cash and $750 million in Lenovo standard shares. The rest of the outstanding $1.5 billion will be paid off over time in a three-year note. The money being exchanged here is interesting for two reasons. First, the agreement gives Google about a 6 percent stake in Lenovo when all things are said and done. And while that's a pretty hefty share of a company as large as Lenovo is, it can't be overshadowed by how much money Google has actually lost in the deal. You see, back in 2011, Google picked up Motorola for $40 per share, which comes out to about $12.5 billion. So while saying you made $3 billion is a good thing, losing $9 billion isn't so great overall.
On the plus side, perhaps $9 billion was spent on Google acquiring an extensive portfolio of patents, which the company will maintain ownership of after the deal is finalized. Lenovo will be able to receive licenses to those patents, along with access to other intellectual property. Lenovo will pick up the entire Motorola Mobility brand and trademark portfolio, as expected, and will also receive more than 2,000 other patent assets.
Yang Yuanqing, chairman and CEO of Lenovo, said,
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. We will immediately have the opportunity to become a strong global player in the fast-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.
Even up until the sale date, despite improved marketing efforts and increased options for customization in its handsets, Motorola has been losing money and the new flagship phone, Moto X, did not come close to meeting sales expectations. Will putting Motorola back into the hands of a hardware manufacturer leave the brand in better shape than it has been for two years? Lenovo expects to use this as its platform to become more competitive in three markets, in the company's effort to reach 100 million new people. It's a quite ambitious goal, but with a brand like Motorola backing it all up, it might just work.