In a bid to enter the market of smartphones in the U.S., Lenovo Group, one of the top PC makers in the world, on Wednesday announced intention to acquire Motorola Mobility division from Google. The agreement will help Lenovo to significantly strengthen position in the smartphone market and will allow Google to avoid conflicts of interests when developing its Android operating system going forward.
“The acquisition of such an iconic brand, innovative product portfolio and incredibly talented global team will immediately make Lenovo a strong global competitor in smartphones,” said Yang Yuanqing, chairman and CEO of Lenovo.
Google acquired Motorola Mobility division from Motorola back in 2012 for $12 billion. The firm has struggled to revamp the money losing business, whereas Motorola Mobility has failed to create breakthrough handsets featuring Android operating system. In spite of the fact that Google cannot make money on Moto G, Moto X and Droid-series handsets, it still competes against its own customers with Motorola Mobility. Apparently, the company decided that it is time to get rid of its hardware unit, but retain the patents.
Google will retain ownership of the vast majority of the Motorola Mobility patent portfolio, including current patent applications and invention disclosures. As part of its continuing partnership with Google, Lenovo will obtain a license to this rich portfolio of patents and other intellectual property. Additionally Lenovo will receive over 2000 patent assets, as well as the Motorola Mobility brand and trademark portfolio.
“We are confident that we can bring together the best of both companies to deliver products customers will love and a strong, growing business. Lenovo has a proven track record of successfully embracing and strengthening great brands – as we did with IBM’s Think brand – and smoothly and efficiently integrating companies around-the-world,” said Mr. Yuanqing.
At present, Motorola Mobility is the #3 Android smartphone manufacturer in the U.S. and #3 manufacturer overall in Latin America. Unfortunately, its market share is not really high in the USA and it is hard to imagine how Motorola can reclaim it from giants like Apple and Samsung who are innovating really quickly.
The purchase price is approximately $2.91 billion (subject to certain adjustments), including $1.41 billion paid at close, comprised of $660 million in cash and $750 million in Lenovo ordinary shares (subject to a sharecap/floor). The remaining $1.5 billion will be paid in the form of a three-year promissory note.
KitGuru Says: Lenovo knows how to slowly, but surely grow its businesses. Just about a decade ago its share on the PC market was considerably lower compared to HP and Dell, but today Lenovo is the #1 PC supplier in the world. Perhaps, it can find a way how to return Motorola to the mass market and make it a decent competitor to Apple and Samsung.