Google has agreed to sell its Motorola Mobility
division to Lenovo, marking a rapid retreat after less than two years in the
handset business.
The deal values the business at $2.91bn in cash, stock and
deferred payments, the companies said, and is set to leave Google with a stake
of around 5 per cent in the Chinese hardware maker.
Google’s $12.5bn
acquisition of Motorola in May 2012 marked the high point in the smartphone
patent bubble, as the internet company raced to make up for a shortage of
intellectual property that had left its Android mobile ecosystem vulnerable to
legal attack.
Motorola’s trove of 17,000 patents was the
main attraction for Google, though its hardware business was seen as an extra
incentive, giving it the option to move into its own branded devices against
the likes of Apple, Nokia and BlackBerry. However, the move risked antagonising
other makers of Android devices and Google failed to reignite sales for the
business. The division lost $645m in the first nine months of last year.
For Lenovo, the purchase represents a second
multibillion-dollar deal acquisition within a week as it accelerates its move
into western computer and handset markets. Last week it announced a $2.3bn
purchase of IBM’s industry-standard server business, which makes low-margin
computers based on the same technology underlying PCs. The deal “gives Lenovo a
brand name, it’s very similar to when they bought the IBM PC business – that’s
worked very well”, said Ken Dulaney, an analyst at Gartner.
However, the sale to a Chinese group is a
reversal of Google’s attempt to revive Motorola as a “Made in America” brand.
The company late last year opened a factory in Texas for assembling its Moto X
handsets, a task typically done in mainland China by outsourced manufacturing
such as Foxconn.
Lenovo is set to pay $660m in cash and $750m
in stock at the time the deal is closed, with a further $1.5bn payment in the
form of a three-year promissory note. The stock component will be covered by a
collar putting a cap and floor on the number of shares to be issued, the companies
said. As part of the sale, Lenovo will assume 2,000 patents, the two companies
said. Google had already sold the TV set-top box business, called Motorola
Home, for $2.6bn.