Google selling Motorola smartphone business to Lenovo for $2.9 bn

Jan 30 2014, 10:34 IST
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Google Chief Executive Officer Larry Page said that Google would be best served by focusing on smartphone software rather than devices. Google Chief Executive Officer Larry Page said that Google would be best served by focusing on smartphone software rather than devices.
SummaryUnder the deal, Google will keep majority of Motorola's patents, considered its prize assets.

Google is selling Motorola's smartphone business to Lenovo for $2.9 billion, a price that makes Google's biggest acquisition look like its most expensive mistake.

The deal announced Wednesday will rid Google Inc. of a financial headache that has plagued the Internet company since buying Motorola Mobility for $12.4 billion in 2012. Motorola has lost nearly $2 billion since Google took over, while trimming its workforce from 20,000 to 3,800.

Lenovo Group said on Wednesday that it agreed to buy Google Inc's Motorola handset division for $2.91 billion, in what is China's largest-ever tech deal as Lenovo buys its way into a heavily competitive U.S. handset market dominated by Apple Inc .

It is Lenovo's second major deal on U.S. soil in a week as the Chinese electronics company angles to get a foothold in major global computing markets. Lenovo last week said it would buy IBM's low-end server business for $2.3 billion.

The deal ends Google's short-lived foray into making consumer mobile devices and marks a pullback from its largest-ever acquisition. Google paid $12.5 billion for Motorola in 2012. Under this deal the search giant will keep the majority of Motorola's mobile patents, considered its prize assets.

Google had previously recovered some of the money that it spent on Motorola by selling the company's set-top operations last year to Arris Group Inc. for $2.35 billion. Google is also keeping most of the patents that came with the Motorola purchase.

It's unclear if Google will have to absorb a charge to account for the difference between what it paid for Motorola Mobility and what it is getting back. The Mountain View, California, company may address the issue Thursday when it announces its fourth-quarter earnings after the market closes.

Most investors viewed Motorola as an unnecessary drain on Google's profit, a perspective that was reflected by Wall Street's reaction to the sale. Google's stock gained $28.08, or 2.5 percent, to $1,135 in extended trading.

Google Chief Executive Officer Larry Page said that Google would be best served by focusing on smartphone software rather than devices.

The purchase will give Lenovo a beach-head to compete against Apple and Samsung Electronics as well as increasingly aggressive Chinese smartphone makers in the highly lucrative U.S. arena.

While Google is backpedaling, Lenovo Group Ltd. is gearing up for a major expansion. Already the world's largest maker of personal computers, Lenovo now appears determined to become a bigger player in smartphones as more people rely on them

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