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Lenovo buys Google Motorola smartphone unit for $2.91bn

30 Jan 2014
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Lenovo will buy out Google-owned smartphone maker Motorola Mobility for $2.91bn, $9.5bn less than Google paid for the company less than two years ago.

The deal is the second major acquisition for the Chinese firm in a week, after it acquired IBM's ailing low-end server business last Thursday for $2.3bn.

The news sent shockwaves through the tech industry, with Lenovo seeing its share price fall by 8.2 percent as investors worried that it had overpaid for Motorola which, despite heavy backing from Google, continues to lose money each quarter. The company ran at a $1.1bn loss in 2012.

Google's purchase of Motorola in 2012 saw the company gain a large portfolio of patents, an increasingly valuable commodity in the tech world, which sees patent disputes in high profile court cases almost every week. Lenovo will receive 2,000 patents in the deal, although which it will acquire is yet to be announced..

Google chief executive Larry Page said he believed that Motorola – and the Google-owned Android operating system – would be "better served" by Lenovo.

"This move will enable Google to devote our energy to driving innovation across the Android ecosystem, for the benefit of smartphone users everywhere," he wrote in a blog post.

"Lenovo has the expertise and track record to scale Motorola into a major player within the Android ecosystem. They have a lot of experience in hardware, and they have global reach."

He added that Google's rights to Motorola's patents had "leveled the playing field" for Android phone makers. On Monday it was announced that Google and Samsung had reached a 10-year patent deal, further strengthening the company's portfolio.

Motorola will keep its brand identity in North America and Latin America when the purchase is made official following approval from both the Chinese and US governments. The Lenovo brand will be used in China and other emerging markets.

Lenovo chief executive Yang Yuanqing said his company would strengthen the Motorola brand. "I am confident we will be successful with this process, and that our companies will not only maintain our current momentum in the market, but also build a strong foundation for the future," he said.

The deal will see Lenovo instantly gain a six percent hold on the global smartphone market, according to Strategy Analytics, placing it third behind Samsung and Apple

The buyout is significant for China's smartphone industry, which is dominated by the likes of native firms ZTE and Huawei. Non-Chinese firms have traditionally struggled in the market, and even the likes of Apple have only recently begun gaining a foothold in the region as business relations between the company and the Chinese government and consumers have warmed.

Despite a positive move for Android in China, still only 3.5 percent of Android devices in China have the Google Play store app installed, according to Reuters.

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Michael Passingham
About

Michael Passingham joined V3 as a reporter in June 2013. Prior to working at V3, Michael spent time at computing magazine PC Pro. Michael covers IT skills, social media, tech startups and also produces V3's video content.

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