Why Google Is Taking a $9.5 Billion Hit on Selling Motorola to Lenovo

Why Google Is Taking a $9.5 Billion Hit on Selling Motorola to Lenovo

Less than 2 years ago, Google caused a lot of puzzled looks when it bought Motorola, the mobile device hardware manufacturer. It didn’t seem like an obvious fit.

And the even more head-scratching news is that Google is now selling Motorola to Lenovo for almost $10 billion less than what it paid. Google purchased Motorola in 2012 for $12.5 billion and is now selling it for $2.91 billion.

But as you look closer, it may be a better deal for Google than it seems — and a good deal for Lenovo.

As part of the deal, Google will retain ownership of Motorola Mobility’s patent portfolio. Lenovo will be granted a license to these patents and other intellectual property still owned by Google after the sale.

Why It’s Good for Lenovo

Lenovo will get 2,000 patent assets and the Motorola Mobility brand and trademark portfolio, said Google and Lenovo in a joint statement.

The acquisition of Motorola Mobility expands Lenovo’s mobile profile. The company will now own the Motorola Moto G, Moto X, and Ultra DROID series of smartphones. Lenovo will also take control of Motorola’s “product roadmap” in the future.

By acquiring Motorola Mobility, Lenovo enters the North and Latin American smartphone markets wit a strong brand. Both companies claim Motorola Mobility is the third largest company in those markets already. Lenovo hopes Motorola will help the company establish itself in the Western European smartphone market too.

In a prepared statement, Lenovo chairman and CEO Yang Yuanqing 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.”

Why It’s Good for Google

For Google this means a boost in the number of phones using the company’s Android operating system on the market. Google CEO Larry Page says selling Motorola to Lenovo allows his company to focus on developing the Android mobile operating system. And as Quartz observes:

“It might seem like Google is taking a $10 billion bath on the sale of Motorola to Lenovo. But Motorola has already helped Google save what could amount to billions of dollars on its taxes, which softens the blow. And there’s another way to look at this: Google has created a competitor to Samsung that is headed by an ex-Googler (for now) that will now go to a company, Lenovo, that has proved itself quite capable of succeeding in the low-margin hardware business.”

Image: Wikipedia

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Joshua Sophy Joshua Sophy is the Editor for Small Business Trends and the Head of Content Partnerships. A journalist with 20 years of experience in traditional and online media, he is a member of the Society of Professional Journalists. He founded his own local newspaper, the Pottsville Free Press, covering his hometown.

8 Reactions
  1. Thanks for this great bit of information.

    I had no idea Google was selling Motorola.

    And, doing so helps them pay less taxes?


    Only in America.

    The Franchise King®

  2. Not to mention that Motorola was losing money each and every month. Gotta get that drag off the books since Google just announced that they missed Q4 earnings estimates.

    And I’m glad Motorola will get a fair shake. I love my Razr Maxx phone.

  3. I didn’t know Google bought Motorola. Learnt something knew.

    I did think they were crazy to sell it for a lot less than they bought it for; didn’t make sense to me, but now it does.

    • Me too. I was quite surprised to see how this turned out. They purchased it but they were not able to put it into good use. I guess even companies like Google makes mistakes too.

      • I don’t think they should have bought it in the first place, but that’s just me though. Then again, companies do diversify, so I don’t blame them for trying.

  4. I’m not sure I’d view Google’s purchase of Motorola as a mistake. What might appear as a loss now by selling for lower than it was purchased, it could have been worse had phones Google developed as owner of Motorola tanked in the market.

    Now, Lenovo will take the hit for any flop phones and Google has a maker that is guaranteed to make phones with its operating system. In the end, I think Google comes out ahead on this deal.

  5. They didn’t “take a $9.5B hit,” you’re clueless if you think Google did. They kept the patent portfolio and sold off the manufacturing side of things for the phones. The patents are worth more than everything else combined and every phone that Lenovo makes will pay a licensing fee to Google… In the end they’re making money hand over fist without having to do anything. Plus, that portion was not a money maker, Google doesn’t make a lot of hardware and doesn’t have the business partnerships to distribute, etc. Lenovo is a hardware manufacturer, is quite good at it, and Android will surely show up on a majority if not all of the phones.

    • Hi Christopher,

      Yes, I agree, that was the point of Josh’s piece. On the surface it looks like a loss if you just look at purchase and sale price numbers. But Google gets patents and tax benefits. So Google comes out pretty well. 🙂

      – Anita

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