Lenovo’s Motorola purchase: bargain or bane?

IHS shares its insights on the Chinese company’s latest acquisition

Tags: ChinaGoogle IncorporatedIHSLenovo GroupMergers and acquisitionsMotorola Mobility (www.motorola.com)USA
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Lenovo’s Motorola purchase: bargain or bane? Ian Fogg, director, Mobile and Telecoms, IHS Technology.
By  Ian Fogg Published  January 30, 2014

Previously, China-headquartered Lenovo purchased IBM's PC client business in 2005, and IBM's server business in January 2014. Now Lenovo has agreed terms to buy Motorola Mobility from Google for $2.91bn, including the Motorola brand, current devices such as the Moto X and G, and a future-product roadmap. Ian Fogg, director, Mobile and Telecoms, IHS Technology, gives the analyst company's take on what the deal will mean.

The deal with Lenovo confirms that Google's main interest in buying Motorola was its patent and IP portfolio because the company will retain the "vast majority" of patents as part of the deal. Lenovo will have a licence to all IP, plus will gain over 2,000 patent assets.

Google creates a much simplified business environment by divesting itself of Motorola Mobility. It removes the channel conflict with other Android smartphone makers because Google will no longer have its own competing smartphone hardware division. Like Apple, Nokia, and Palm before it, Google has failed to balance the competing business demands of distributing operating systems while also making hardware. Where those companies chose to downplay their OS licensing business in favour of their own hardware play, Google did the opposite and sacrificed Motorola.

Lenovo benefits in four key areas through the acquisition:

1. Entry to the US mobile market

Motorola remains a strong player in the US with relationships with the main carriers. By contrast, Lenovo has mainly operated in uncontrolled mobile markets where its products have been distributed in retail. Lenovo gains greater understanding of how to work with the mobile operator channel.

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