Back in August of 2011 Google purchased the cellular handset division of Motorola for $12.5 billion. It was suspected that the main reason for the purchase was to gain access to a portfolio of patents held by Motorola. In a tech world gone mad with lawsuits over patents, the best defense is to own a bunch of patents that can be used against whomever attacks you (sort of like mutually assured destruction). At the time (back in 2011) Google was very light in the patent department and it didn’t have much ammunition to fend off attacks from the likes of Apple.
Throughout the past two years Motorola, under Google’s ownership, has brought out a couple of noteworthy phones. However the greatest thing about them has been their low price relative to their feature set and quality, especially the Moto G. However, Google is not a hardware company, and many critics suggested that as a software company they should stick with what they know best.
Just yesterday we learned that Google has come to that conclusion, as they’ve agreed to sell the Motorola handset division to Lenovo for $2.91 billion. If you’re like me however, you probably thought that Lenovo was a division of IBM, but in fact they are a Beijing-based company...
that’s been around since 1984. They rose to prominence in North America when they purchased the laptop division of IBM.
Surprisingly the sale seems like Google is taking a bath and has suffered a fairly hefty loss (12.5B minus 2.91B euqals 9.59B), but Google has kept most of the patents that came with the original purchase. This is after all what many people suspected they’d bought Motorola for in the first place. $9.6 billion for patents may seem like a lot to pay, but if those patents help shield Google from fighting many future patent lawsuits, it is probably a good investment.
In an interview with Fortune magazine, writer Miguel Helft asked Lenovo CEO Yuanqing Yang if he planned to catch up with market leaders Samsung and Apple. His response was “Definitely, over time. Our mission is to surpass them”. That’s a tall order, given that Samsung and Apple own a huge chunk of the smartphone market.
There doesn’t seem to be any doubt that Lenovo will build a quality product, but what’s not so certain is whether or not they will continue with the aggressive pricing strategy started by Google. However, they will need to complete with other low-price Chinese manufacturers such as Huawei, and so there’s good chance they will.