End of an affair: why Google flogged problem child Motorola to Lenovo

By Graeme Burton
30 Jan 2014 View Comments
Motorola logo taken at MWC

Google's $12.5bn acquisition of Motorola Mobility, the mobile phone arm of the US electronics giant, must pass as one of the finest deals ever made - by Motorola.

Further reading

The news today that Google has struck a deal to offload the battered company onto deal-hungry Lenovo for just $660m in cash (topped up with a fistful of Lenovo stock and a wodge of interest-free promissory notes) demonstrates just how keen Google was to offload the loss-making unit to anyone that would take on its adopted problem child.

Given that only Lenovo or Huawei would have had either the desire or the wherewithal to take such a troubled company off of Google's hands, Lenovo was able to push a hard bargain - but what exactly did it buy and, more crucially, what is it going to do with it?

First, it gets access to markets around the world that would otherwise take years to build up: flogging smartphones isn't just about lobbing cheeky deals at mobile operators and selling job lots to Carphone Warehouse. It requires local knowledge, local people, and the establishment of after-sales networks and other infrastructure. Putting all that together from scratch takes time and money - with no guarantee of a pay-off.

Indeed, one of the key reasons for Microsoft's acquisition of Nokia was not just its technology and design expertise, but its well-developed channels to markets around the world. And that is one of the keys for Lenovo: its smartphones currently largely sell only in China, but the Motorola acquisition buys it instant, worldwide coverage, as well as a brand name that isn't yet completely tarnished.

Market access and intangible expertise were cited by Peter Horensius, a senior vice president at Lenovo, to Computing as reasons for Lenovo's purchase last week of IBM's System X server unit. Lenovo's System X acquisition would speed up the company's growth by five years, claimed Horensius, and the hope is that Motorola will help it do the same in smartphones.

Already, Lenovo claims a number four position in the global smartphone market, but based largely on its rapidly built-up number two position in China. The Motorola acquisition will add a network and footprint in North America and South America, where it still enjoys a respectable-ish market share; as well as Europe, where the brand has dwindled to a market share of less than one per cent under Google's ownership.

Another page for Google

Furthermore, while Google CEO Larry Page may have morphed into Doctor Hackenslash as he sought to contain Motorola's losses - cutting staff numbers by 20 per cent in August 2012, for example - it still retains plenty of engineering expertise, as well as sales, marketing and other valuable know-how.

[Please turn to page 2]

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