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

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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 [1] 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 [2] 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 [3] 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 [4]:

“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