Seeking Alpha

Google selling Motorola to Lenovo for $2.91B, will keep patents

  • Just an hour after reports emerged Google (GOOG) is set to sell Motorola's phone ops to Lenovo (LNVGY), the deal has been announced by Larry Page. Lenovo will pay $2.91B for the struggling, loss-generating smartphone maker; Google will retain the "vast majority" of its patents.
  • Page explains the deal by stating the smartphone market is "super competitive," and that "it helps to be all-in." He promises the sale doesn't have broader implications for Google's hardware efforts.
  • Google paid $12.5B for Motorola Mobility in 2011. After backing out the Lenovo sale, the Arris sale, and $3.5B in cash, Google effectively paid ~$3.7B for Motorola's patents, assuming one doesn't count the losses the phone unit has produced under Google's control.
  • The sale expands Lenovo's U.S. presence, and gives it access to Motorola's respected hardware engineering teams as it tries to grab high-end Android share from market leader Samsung (SSNLF). IDC estimates Lenovo had a 4.9% smartphone share in Q4 (up from 4.1% a year ago).
  • The deal also removes a point of friction between Google and its Android partners. It shortly follows a report stating Google has pressured Samsung to tone down its Android UI changes and more strongly emphasize Google's apps/services, as it tries to exert greater control over Android's look and feel.
  • GOOG +2.2% AH. In addition to the Motorola deal, shares could be getting a lift from Facebook's Q4 beat.
Comments (38)
  • kmi
    , contributor
    Comments (3975) | Send Message
     
    This: Google effectively paid ~$3.7B for Motorola's patents" is nice;

     

    One wonders if any cross licensing of patents similar to the Samsung deal occurred? The handset business alone can't possibly be worth -that- much to Lenovo when it's losing money?
    29 Jan, 05:29 PM Reply Like
  • bigchimp
    , contributor
    Comments (17) | Send Message
     
    Lenovo bought their PC business from IBM and it was bleeding money...they are now the #1 PC maker in the world, no?

     

    There's value there if you know how to use what's left over.
    29 Jan, 06:40 PM Reply Like
  • sl100
    , contributor
    Comments (110) | Send Message
     
    do not buy into this 3.7 loss on motrola they lost lot more than this article says but that's not the point they are trying to manipulate the stock to go up. Clear indication is after hours action this is the time where institutions which hold a large chunk of stock can move the stock with little money. In this case it fidelity who is manipulating the stock.
    See below I posted on BB how this works.= so do not get sucked into this and sell into this one.
    This article is to pump the equities tomorrow, GOOG is a big portion of index funds. Basically GOOG is not doing well so to make the numbers they are buying companies and selling of stuff to beat "analyst expectation". Get news out after mkt close and get the stock to move up on low volume after hours. Then get the MSM to publish it on CNBC, BB and other sites.
    Fidelity is who is a suspect in trying move this stock up basically Fidelity's 2 big funds Contra Fund and Growth fund have the highest holding. contra Fund has 7.5% of assets tied to GOOG holding and growth fund has 5% of it asset tied to GOOG stock. I think if you holding these funds you should look at the top 10 holding and should get out of these 2 funds they hold some of the most expensive stocks in mkt and these are big funds so they cannot get out fast so it is prudent to move them out before others do. 401K holder Should take it out before others do and move to safer fund or some money mkt funds, down draft will likely go on for some time few days up few days down. I think these funds majority of the holders are 401K plan holders .
    I thing Fidelity tired to move it yesterday and the day before but could not hold because of the index selling where GOOG makes a big chunk of the index funds. When the earning come out tomorrow Fidelity need to make sure it does not tank in the morning so put this news out (which was already know before) and spin its as positive even though GOOG lost about 10Billion plus on Motorola buy. They also tried to use Cramer CNBC to pump the stock but index selling could get it to move.
    More proof insiders are selling like crazy in the last year(50Billion) this month alone they have sold 100 plus million if this not a proof of things not sure how we can convince people why the stock mkt is rigged game.
    29 Jan, 09:00 PM Reply Like
  • DanoX
    , contributor
    Comments (2577) | Send Message
     
    Google loss over 10 billion on the Motorola fiasco, nice try.
    30 Jan, 12:37 AM Reply Like
  • bigchimp
    , contributor
    Comments (17) | Send Message
     
    How do you get that number? they sold the set-top box unit for over 2 billion, they kept the Advanced Technology group, they get the patent portfolio, they get Lenovo and Arris stock, a patent licensing deal with Arris...

     

    They lost a ton of money, but not 10 billion even if you conservatively value all of the stuff they kept and got back.

     

    Google laughs at a $5 billion or even a $10 billion write-off, though. At least they were able to cut their losses. I like Google.
    30 Jan, 01:17 AM Reply Like
  • DanoX
    , contributor
    Comments (2577) | Send Message
     
    IBM gave up, like all those American electronic companies in the 1970's and 1980's, when faced with a little competition from the Japanese companies.
    31 Jan, 10:27 PM Reply Like
  • DanoX
    , contributor
    Comments (2577) | Send Message
     
    Nice try again.
    31 Jan, 10:29 PM Reply Like
  • bigchimp
    , contributor
    Comments (17) | Send Message
     
    Lenovo? 80's? Huh?
    3 Feb, 01:45 AM Reply Like
  • hko2012
    , contributor
    Comments (238) | Send Message
     
    Google's commitment to Samsung.
    29 Jan, 05:31 PM Reply Like
  • dividend_growth
    , contributor
    Comments (2878) | Send Message
     
    and to LG, Lenovo, HTC....
    29 Jan, 05:52 PM Reply Like
  • keentolearn
    , contributor
    Comments (128) | Send Message
     
    But Samsung is the biggest.
    30 Jan, 04:00 AM Reply Like
  • omnimoeish
    , contributor
    Comments (468) | Send Message
     
    And China owns a little more of the US. Who would've thought 10 years ago the great Motorola would be owned by the Chinese. I'm curious what Lenovo can do with it. I'm expecting HP to sell their PC unit to Lenovo pretty soon too.
    I don't get what allegience Google has to Samsung. Google gives Samsung a free OS, the only phone OS that matters besides iOS. Samsung makes money off of it. Google gets people to google stuff with it? I don't see the point of friction. It's not like Google was making a killing off selling Motorola phones. The bottom line is that Motorola just can't keep up with Samsung manufacturing juggernautting. They're making 2K res phones. They make virtually every last component of their phones from the battery to the SoC to the display. Motorola can't compete with that as evidenced by the fact that Google had to have LG make the Nexus 5 when they freaking own Motorola.
    Motorola was trying to compete on price recently and that's just a losing game. I feel kind of bad for Lenovo but those Chinese seem to find a way. At least those American jobs will be saved for the time being.
    29 Jan, 06:03 PM Reply Like
  • hacarlos
    , contributor
    Comment (1) | Send Message
     
    Although I agree with your view of the logic behind Google's strategy, I don't agree that it's China owning a little more of the US. It is a global environment after all. It's like saying Brazil and Belgium own a part of the US after acquiring Anheuser Busch. It might feel that way, but in reality we are bound to see more and more of that, being a global market, and that's not necessarily bad. Even American employees of Motorola are better off if Lenovo does a better job at running it than Google did.
    31 Jan, 07:30 AM Reply Like
  • samuel_liu
    , contributor
    Comments (2794) | Send Message
     
    IF Dell and HP weren't run, so short-sightedly & incompetently for the past 10 years+.
    31 Jan, 07:37 AM Reply Like
  • Alan1967
    , contributor
    Comments (210) | Send Message
     
    I'm rather disappointed in this sale. My understanding is the latest phone was made in the US, and I was looking forward to buying something produced in the US.

     

    I'm not even sure if the strategically is the right thing to do. Google could at the very least use the Motorola phones in enforce some discipline on the other Android phone makers, but now that leverage is gone. And I don't think Samsung is any less inclined to support Tizen, or not create a Google Glass-like project than before.

     

    And what about this argument that Google want out or hardware? Well they just bought Nest and still making Google Glass.

     

    I just don't get this move.
    29 Jan, 06:04 PM Reply Like
  • bigchimp
    , contributor
    Comments (17) | Send Message
     
    google never wanted anything more than the patents - they paid a reasonable 4bb for that (excluding losses).
    29 Jan, 06:42 PM Reply Like
  • june1234
    , contributor
    Comments (2492) | Send Message
     
    It was made in the US by the soon to be 2000 former Flextronics employees outside Dallas/Ft. Worth. Hard to pay anyone in the US $2hr to make smart phones.
    30 Jan, 06:16 AM Reply Like
  • nmecmbtnt
    , contributor
    Comments (121) | Send Message
     
    GOOG bought NEST a couple weeks back for $3.2B -- 280 employees doing really "cool" smarthome technologies. After converting dollars to dimes on Motorola--now what?

     

    Is it only to me that these sorts of actions reflect a pattern?
    Not to over-generalizes, but big tech companies seem to know how to 1) create capital from brilliant seeds 2) spend revenue to extend franchise reach 3) grow huge piles of ca$h and 4) sometimes, but only sometimes, capitalize on acquired opportunities.

     

    When it comes to picking new investments as targets for the piles of capital--the wheels seem to come off more often than not.

     

    Sad prediction: GOOG auctions off remnants of NEST in less than three years, for a fraction.

     

    Happy prediction: GOOG's purchase of Boston Dynamics, enables them to become the first industrial sized robotics company generating cash like no tomorrow.

     

    Disclosure: No current or planned positions in any of the above.
    29 Jan, 06:04 PM Reply Like
  • bigchimp
    , contributor
    Comments (17) | Send Message
     
    they essentially bought a huge patent portfolio for 4bb - smart move, they didn't want the hardware biz
    29 Jan, 06:44 PM Reply Like
  • nmecmbtnt
    , contributor
    Comments (121) | Send Message
     
    From the Economist--Aug, 2011: "The purchase is widely regarded as being about Motorola's patents, which Google needs to defend itself from a spate of recent lawsuits."
    Paying to indemnify yourself against a present liability is not the same as buying a productive asset. It may be a sound economic rationale, but not an investment strategy.

     

    Keeping the portfolio keeps you from having to buy it back again when the original IP issues rise from the dead. A paid up settlement, by proxy.

     

    Sad prediction: GOOG auctions off remnants of NEST in less than three years, for a fraction.
    29 Jan, 07:23 PM Reply Like
  • DanoX
    , contributor
    Comments (2577) | Send Message
     
    So you lose over ten billion dollars? Google doesn't do hardware, at least not for a profit.
    30 Jan, 12:42 AM Reply Like
  • DanoX
    , contributor
    Comments (2577) | Send Message
     
    A bunch worthless Ham Radio patents, Motorola under Sanjay Jha shit canned most of the R&D department years before they sold out to Google.
    31 Jan, 10:31 PM Reply Like
  • Rootarmo
    , contributor
    Comments (177) | Send Message
     
    One moment your sitting there hoping you will get transferred or promoted to the "cool" side of the company and the next moment you are reporting to Chinese.

     

    Well it was fun while it lasted employees of Motorola Mobility.
    29 Jan, 07:08 PM Reply Like
  • medzjohn
    , contributor
    Comments (218) | Send Message
     
    What makes it better to be owned by a company that only bought you for your legal papers than by one which wants to put you to work doing what you know how to do? If I worked for Motorola I would be learning how to say "thank you" in Chinese.
    29 Jan, 07:34 PM Reply Like
  • nmecmbtnt
    , contributor
    Comments (121) | Send Message
     
    xie xie -- thank you in Mandarin Chinese, roughly pronounced "syeh-syeh". Uttered in rapid succession; more emphasis on the first xie.
    29 Jan, 07:44 PM Reply Like
  • Rootarmo
    , contributor
    Comments (177) | Send Message
     
    Yea nothing like being a product company owned by Chinese. they better learn to say
    "severance package"
    29 Jan, 07:57 PM Reply Like
  • nmecmbtnt
    , contributor
    Comments (121) | Send Message
     
    Probably will use the abbreviated form: 再见
    29 Jan, 09:07 PM Reply Like
  • techy46
    , contributor
    Comments (5471) | Send Message
     
    Lenovo's going to make Android and Windows phones and tablets with Intel Atoms Inside. They will challenge Apple and Samsung and are smart like a Fox.
    29 Jan, 11:27 PM Reply Like
  • samuel_liu
    , contributor
    Comments (2794) | Send Message
     
    I finished a paper in 2007, unless Lenovo gets its own OS, it can not defeat the market power Apple enjoys.
    30 Jan, 12:18 AM Reply Like
  • DanoX
    , contributor
    Comments (2577) | Send Message
     
    I think I said this in another thread Lenovo buying Web OS and improving it behind the scene would have been an even smarter move.
    31 Jan, 10:36 PM Reply Like
  • The Deep Value Investor
    , contributor
    Comments (277) | Send Message
     
    GOOG selling Motorola and retaining the patents sure makes them seem like a NPE Patent Troll. Not going to be smart considering their appeal with VRNG.
    30 Jan, 12:30 AM Reply Like
  • DanoX
    , contributor
    Comments (2577) | Send Message
     
    The Motorola patents are worthless in court so far.
    30 Jan, 12:44 AM Reply Like
  • Seppo Sahrakorpi
    , contributor
    Comments (1868) | Send Message
     
    @DanoX Agreed, that's an important point.

     

    See Foss Patents for more:
    http://bit.ly/NXJEEH
    30 Jan, 07:27 AM Reply Like
  • samuel_liu
    , contributor
    Comments (2794) | Send Message
     
    HOE TRUE IS THIS?
    http://bit.ly/1n11gvy
    ex15 • 13 hours ago −
    they got a BILLION $ in tax savings, keeping the majority of the patents {the original goal), and are keeping the advanced X division that is working on the most advanced research. U prob should research it before publishing IMO!
    30 Jan, 07:44 AM Reply Like
  • samuel_liu
    , contributor
    Comments (2794) | Send Message
     
    Lenovo may be buying a brand to help it sell smartphones across the world, but it's not getting everything that was under Motorola's umbrella. In addition to the "vast majority" of Motorola's patents, Google will also hold onto the Advanced Technology and Projects division and fold it into its Android team.
    http://engt.co/1fzJ5KI
    30 Jan, 09:26 AM Reply Like
  • DanoX
    , contributor
    Comments (2577) | Send Message
     
    But patents are still worthless (Ham Radio?)
    31 Jan, 10:38 PM Reply Like
  • primelife
    , contributor
    Comments (8) | Send Message
     
    Its a sad day for Moto, no matter how you spin it. The fact is, the Moto X is an amazing phone. The Moto G was great for its price point and what it was intended for be. I honestly believe Google sold Moto because it was eating some of the Nexus sales. Article after article of people leaving other droid devices for the Moto X, especially the Nexus 5, had to play a part. Sad day for Moto, sad day for the average consumer, sad day for those who like android and prefer user experience of specs.
    30 Jan, 12:11 PM Reply Like
  • DanoX
    , contributor
    Comments (2577) | Send Message
     
    Motorola at one time was an American powerhouse taken over by vision less bean counters at the end like Xerox and IBM who are both on a long slow decline.
    31 Jan, 10:42 PM Reply Like
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