Google to sell Motorola to Lenovo for $2.91B

Google (NASDAQ:GOOG) will sell its Motorola Mobile division to China's Lenovo for $2.91 billion, the companies announced. That price is far below the $12.4 billion Google paid for Motorola and its patents in 2011.

However, Google said it will retain the "vast majority" of Motorola's patents as part of its deal with Lenovo. When Google purchased Motorola, the company said that fully $5.5 billion of the deal was based on the value of Motorola's trove of 17,000 wireless patents.

"This move will enable Google to devote our energy to driving innovation across the Android ecosystem, for the benefit of smartphone users everywhere," wrote Google CEO Larry Page on the company's blog. "As a side note, this does not signal a larger shift for our other hardware efforts. The dynamics and maturity of the wearable and home markets, for example, are very different from that of the mobile industry."

Lenovo will use a combination of cash and stock as well as deferred payments to put together the deal, Reuters reported. Lenovo is being advised by Credit Suisse Group while Lazard is advising Google on the transaction, Reuters said.

According to both IDC and Strategy Analytics, Lenovo was the No. 4 global smartphone maker in the fourth quarter of 2013 and the No. 5 smartphone player for all of 2013. The company is strong in its home market of China but has struggled to push into Western markets. Lenovo CEO Yang Yuanqing has said the company's tablets and smartphones will be entering the U.S. and Western European markets by 2015. Google said Lenovo will retain the Motorola brand, as it did when it acquired the ThinkPad brand from IBM in 2005.

"The smartphone market is super competitive, and to thrive it helps to be all-in when it comes to making mobile devices," Page wrote. "It's why we believe that Motorola will be better served by Lenovo--which has a rapidly growing smartphone business and is the largest (and fastest-growing) PC manufacturer in the world."

For Google, the sale unwinds its largest acquisition to date. A major reason for Google's Motorola purchase was to acquire Motorola's portfolio of more than 17,000 wireless patents, which Google said it would use to protect Android licensees. Indeed, Motorola maneuvered Google into raising its bid price 33 percent before Google eventually settled on the final, $12.4 billion price.

Although Google said it would use Motorola's patents to protect Android handset makers, that has not stopped companies from going after Samsung Electronics, HTC, Huawei and Google itself in Android-related patent litigation. Apple (NASDAQ:AAPL) has won hundreds of millions of dollars in patent-litigation damages from Samsung, the world's largest Android handset maker.

Interestingly, earlier this week Google and Samsung forged a wide-ranging, patent-licensing deal that covers the companies' existing patent portfolios and all patents they will each file over the next 10 years. Samsung is the largest supporter of Google's Android platform.

Motorola has continued to bleed cash since being acquired by Google. In the past 19 months, it has slimmed down its product portfolio and workforce to focus on the Verizon Droid franchise and signature phones like the Moto X and lower-cost Moto G. For Google, the sale of Motorola would remove the complication of owning an Android handset maker while developing the open source Android platform, even though the companies say there is a firewall between Motorola and the Android team.

Importantly, Google did manage to retain some value from Motorola beyond its patents; Google in 2012 sold Motorola Mobility's home division to Arris Group for $2.35 billion in cash and stock.

Last October Motorola unveiled Project Ara, which is being spearheaded by the Motorola Advanced Technology and Projects group, the unit led by Regina Dugan, a former DARPA chief. Ara is an open-source program designed to bring modular smartphone design to the masses--in effect giving end users the ability to retrofit and continually customize the hardware of their smartphones. It's unclear what would happen to the project if Lenovo buys Motorola.

Page did not say when Google expects to comlete its sale of Motorola to Lenovo. "The deal has yet to be approved in the U.S. or China, and this usually takes time. So until then, it's business as usual," Page wrote.

For more:
- see this Google post
- see this Reuters article
- see this China Daily article

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Article updated Jan. 29 with confirmation from Google.

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