Google calls Motorola sale a 'win-win' for Android

Google (NASDAQ:GOOG) CFO Patrick Pichette said that the company's sale of its Motorola Mobile business to Lenovo would be a "win-win" for the wider Android ecosystem and that Google will continue to support all of its Android partners.

Speaking on the company's fourth-quarter earnings conference call, Pichette said Motorola can use Lenovo to help it scale internationally and continue the momentum it got from developing the Moto X and Moto G smartphones. Although the Moto X disappointed in terms of sales, Pichette said Motorola had done a great deal to move the Android ecosystem forward through its innovations (the Moto X included features such as Touchless Control, an always-on voice recognition system that quickly learns a user's voice and only responds to them.)

Google will continue to invest in hardware, Pichette said. "As you know from the Nest acquisition and Glass and Wearables, we continue to innovate and we continue to be committed to the hardware in areas that are kind of enterprising, promising, new frontiers and that's where actually we're focusing on," he said, according to a Seeking Alpha transcript.

Earlier this month Google paid $3.2 billion to acquire Nest Labs, a maker of smart thermostats, smoke alarms and other home gadgets, grabbing a foothold in the smart home and Internet of Things segment. He said both Google and Nest "believe that technology should be doing the hard works so that people can get on with their lives and do great things." Pichette said Google's goal with Nest is to help it scale internationally and reach new markets. Interestingly, TechCrunch reported that, according to sources it did not cite, the Nest team will still work on hardware devices, but not necessarily thermostats and the like, and may make other gadgets for Google.

Pichette said that the Motorola deal will help the Android ecosystem (presumably by giving Lenovo greater scale) and that "in that sense, we have clear objectives of support" of Android. Interestingly, while Pichette sidestepped a question about whether owning Motorola was an impediment to working with other Android licensees, he said Google has "always had clear objectives to support all of our partners. And after this transaction, it's very clear that we'll continue to be kind of this impartial supporter of the entire ecosystem."

On Wednesday, Google announced plans to sell Motorola to Lenovo for $2.91 billion, after having bought the business for $12.4 billion in 2011. The bulk of that purchase price was for Motorola's 17,000 patents, which Google valued at $5.5 billion. Google will retain about 15,000 of the patents it got as part of its original deal, and will grant Lenovo a license to use certain other ones. (Google also sold Motorola Home, the part of the business that made set-top boxes, to Arris in 2012 for $2.35 billion.)

It's somewhat easy to see why, from a financial perspective, Google jettisoned Motorola: Motorola was simply not a healthy business financially. Motorola's operating loss ballooned in the fourth quarter to $384 million, compared to an operating loss of $152 million in the year-ago quarter. Motorola had $1.24 billion in revenue for the fourth quarter, down from to $1.51 billion in the year-ago period.

Overall, Google reported that net revenue, excluding sales passed on to partner sites, rose 11 percent to $13.6 billion, which beat the average analyst projection for $13.4 billion, according to Bloomberg. However, Google's profit excluding certain items was $12.01 a share, which missed analysts' average projection of $12.25 per share. Net income rose 17 percent to $3.38 billion.

For more:
- see this release
- see this WSJ article (sub. req.)
- see this separate WSJ article (sub. req.)
- see this Bloomberg article

Special Report: Wireless in the fourth quarter of 2013

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