Feature

Issue of the week: Why Google unloaded Motorola

Three years after shelling out $12.5 billion for Motorola, Google announced its sale to Lenovo Group for $2.9 billion.

Now we know that Google’s purchase of Motorola was a “gargantuan mistake,” said Verne Kopytoff in Time.com. Just three years after shelling out $12.5 billion for the phone-maker, Google last week announced its sale to electronics company Lenovo Group for $2.9 billion. “Google’s exit after just 22 months isn’t exactly surprising.” The decision to acquire Motorola, a complex manufacturing operation with chronically slim margins, “never seemed convincing.” Offloading it is a smart move, since investing more in its operations would be “risky and tangential to Google’s more important Android software business.” Sure, this divestiture comes at a high price, but “making big bets on risky projects” is part of Google’s culture. “Usually, the failures are relatively small and disappear quietly, never to be seen again.” This “misstep was big and unavoidably public,” but Google can afford to take the hit.

Whatever it may look like, Google’s dalliance with Motorola was no failure, said Leonid Bershidsky in Bloomberg.com. “The reason can be found in the part of the company that Google has retained—a portfolio of thousands of patents.” That intellectual property may prove useful down the road, helping Google develop new products, ward off lawsuits from rivals, and drum up licensing fees. Motorola’s more than 17,000 patents have also helped the company take advantage of offshore tax schemes that whittle down its tax bill. Google made only a “halfhearted try” at making handsets. But “it takes the patent cache more seriously. That part of the Motorola deal might not have outlived its usefulness yet.”

Apple should be worried, said Chunka Mui in Forbes.com. By exiting the handset business, Google can “go back to being an arguably honest broker” of the Android operating system and lead “innovation to compete with Apple’s iOS.” And while Lenovo isn’t likely to “inspire stronger high-end competition against Apple than Google,” you can count on the Chinese firm to “be a tougher competitor at the low end.” It already “has better manufacturing prowess and scale than Google, and greater enthusiasm for that end of the market” than either Silicon Valley firm. The iPhone won’t be toppled by Lenovo’s “attack from below,” but a stronger Chinese rival “adds fuel to a very competitive ecosystem.”

This purchase “is the largest ever by a Chinese tech company, and represents an ambitious departure for Lenovo,” said Charles Riley in CNN.com. The company, best known as a PC-maker, now owns “a brand that is one of the most respected in the business,” giving it a smartphone foothold in Europe and the U.S. Lenovo has long sought just that, “and was reportedly interested in buying BlackBerry before the Canadian firm took itself off the market.” If its past successes are any indication—the Chinese company “bought IBM’s ThinkPad division in 2005 and was able to turn it into a dominant force”—Lenovo could soon become a major rival to smartphone giants Apple and Samsung.

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