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

It's an ideal time for Google to divest Motorola Mobility now the potential for conflict with Samsung has receded, because Samsung and Google have signed a cross-licensing agreement on intellectual property. Previously, Google had the option of leveraging Motorola to give Google services a route to market in the event Samsung shut Google's services out of its Android devices. Now that capability appears unlikely to be needed.

Google has made a significant loss on its investment. Lenovo's $2.91bn barely covers the cash acquired as part of Motorola Mobility. Google split cost of its Motorola Mobility acquisition as follows in its SEC filings: Of the $12.4bn purchase price; $2.9bn was cash acquired; $5.5bn was attributed to patents and developed technology; $2.6bn to goodwill; $730m to customer relationships; and $670m to other net assets acquired. In addition to these figures, Google supported the loss-making Motorola business for over two years.

Yet Google should also gain a new, stronger, Chinese partner that could help Android. Google knows Chinese OEMs will be critical for Android's future success. Because of Lenovo's previous purchase of IBM's PC business, Lenovo is an easier partner for Google than would be many other Chinese OEMs.

In China, Android is winning, but without Google's help, and without Google's services such as its Google Play app store, Gmail, search, advertising and the rest. If, Google could leverage this Lenovo relationship so as to nurture Google's services inside China, then even the loss Google has made on Motorola Mobility would have been worthwhile.

But that idea would be very much another moon shot, to use Larry Page's famous description of the effort required by Andy Rubin and team to create Android's current success in smartphones.

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