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 on 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.
Why Lenevo acquired Motorola
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 instead of laptop and desktop computers to go online.
Lenovo already is among the smartphone leaders in its home country of China, but it has been looking for ways to expand its presence in other markets, especially the US and Latin America. The company had been rumored to be among the prospective buyers for BlackBerry Ltd. when that troubled smartphone maker was mulling a sale last year.
This marks Lenovo’s second high-profile deal this month. The company announced plans last week to buy a major piece of IBM Corp.’s computer server business for $2.3 billion.
Buying Motorola will enable Lenovo to join Apple Inc. as the only major technology companies with global product lines in PCs, smartphones and tablets, putting Lenovo in a better position to become a one-stop shop for companies to buy all their devices from the same vendor, said Forrester Research analyst Frank Gillett.
“This makes Lenovo a company to watch,” Gillett said in an email. “The personal device manufacturer business is consolidating, and manufacturers must compete in all three device markets, plus emerging wearable categories, or get left out of the next market shift.”
After it takes over, Lenovo plans to retain a Motorola management team led by Dennis Woodside. Google had reassigned Woodside, one of its top executive, to run Motorola Mobility in hopes he could engineer a turnaround. Under Woodside, Motorola released two new smartphones last year, the Moto X and Moto G. The phones attracted lots of headlines, but didn’t sell as well as anticipated, analysts say.
What Google is retaining from Motorola :
Google’s blockbuster $2.9 billion sale of Motorola Mobility to Lenovo won’t include the Advanced Technology and Projects group led by former DARPA director Regina Dugan. The news was confirmed today on a conference call with Lenovo, and sources familiar with the matter say the group will be integrated with Google’s Android team, where Dugan will report to Sundar Pichai but maintain a more independent role.
Dugan, who was named to The Verge 50 earlier this year, manages a team of just under 100 people, all of whom will be moving from their current offices in Sunnyvale to Google’s Mountain View office.
GOOGLE WANTS TO SCALE PROJECT ARA
The most notable project to come from Dugan’s group was the Project Ara modular phone, which allows different phone configurations to be constructed from various parts. The plan is to use Google’s scale and resources to accelerate the project, as well as other wild ideas like security tattoos and other biotech sensors.
Google will also retain the patents developed by the Advanced Technology group, although Lenovo will have a license to them.