Google sold Motorola Mobility to Lenovo: But Why?

It was late night, probably around 3.45AM. I was watching Barcelona vs Levante football match on TV. Suddenly my Galaxy S3 made a buzz. It is nothing special. Your Android can buzz thousands time a day. I picked up my phone and looked up into lock screen. It was a CNET breaking news and it states ‘Lenovo buying Motorola from Google. More to follow.’ It’s the one of a kind news that you may never expect to hear, at least without any pre speculation. Immediately I picked up my laptop and start searching. Most of the sites have nothing on that matter at that point. But after a few minutes the news hung on every top websites. I have only one question at that time. Why Google? Why? After Moto X and Moto G success what could possibly lead them to do this?

One of the few reasons could be Google’s revenue decline as it continued to drag down company’s balance sheet, with the unit's operating loss actually widening to $384 million from $152 million a year ago. Let’s do some math. Lenovo bought Motorola Mobility from Google for $2.91 billion, which would make it around two and a half years since Google bought Moto for $12.5 billion in 2011. So by using simple math, you get that Google has lost some $9.6 billion in the process. Adding the money Motorola drained from Google on a quarterly basis the figure is even over $10 cool billion. Keep in mind that Google doesn’t sell the large portfolio of patents they bought from Motorola. It also got to keep the modular Project Ara.

Lenovo buying Motorola from Google

When Google bought Motorola the latter was sitting on $3 billion in cash and close to $1 billion in tax credits so the deal cost Google around $8.5 billion. Then Google sold Moto’s set-top box business to Arris for around $2.4 billion, rounding the total to $6.1 billion. Finally by subtracting the $2.9 billion from Lenovo and you’re looking at a $3.2 billion loss by Google.

Google will likely have to suffer through a few more quarters as the deal goes through approval. The company hasn't stated when it will close. Motorola directly employs over 4,000 people, many of them at its headquarters in Libertyville. For the moment, at least, those employees and the executive team appear to be safe. Lenovo officials said there were no immediate plans for layoffs or a leadership shakeup. Things are a little more uncertain for those who rely indirectly on Motorola for their paycheck.

The deal, however, turns Lenovo into the third largest smartphone maker in the world. Lenovo is particularly proud of its investment in America. The CEO, Yang Yuanqing, even took time out during the Motorola press conference to reference President Barack Obama's call to invest in America during the State of the. In a follow-up statement, it claimed that the purchases of Motorola and IBM's server business mean that it has invested about $6 billion in the American market since 2005.

Flextronics cannot predict the future and, while it's hopeful about extending its manufacturing partnership with Motorola, it acknowledged that everything could change in a year from now. Still, when one of the few companies building PCs in the US joins forces with the only company building smartphones in the US, it's hard not to be at least slightly optimistic about the future of high-tech manufacturing in the country.

No matter what I am reading everywhere I am still not clear about Google’s intention. They are not like this type. I don’t believe they bought Motorola 2 years ago for making quick cash. Yeah I know about the patents but when you are in track, thinking about closing nexus line – all of a sudden it’s a shocking deal.

 
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