Google buy Motorola for $12.5 billion and sell it off for $2.91 billion
Google sold the remnant of Motorola's mobile phone operations to Lenovo getting the world's dominant mobile OS company out of the business of making mobile phones. This is a good move for Google and a good move for Lenovo, although it may not be a good move for consumers. Here's why Google and Lenovo are both walking away from the deal happy.
1. Google's mobile strategy is to get Android onto as many phones as possible, as almost all of the company's revenue comes from advertising,including on mobile devices. This is very different from Apple, BlackBerry, and Microsoft, which are all now integrated hardware-software businesses.
2. Google wanted Motorola for the patents, not for the manufacturing. Apple's patent attack on Android licensees was slowing down and worrying Google's customers. Motorola had a massive patent library that can be used defensively.
3. Once Google bought Motorola, some of its major licensees started hedging their bets and developing or buying their own non-Google OSes: Samsung with Tizen and LG with WebOS, for instance. They were worried Google would compete directly with them.
4. Motorola never made Google any money.
5. By ditching Motorola, Google can be a neutral, honest broker of operating systems to the world and make money doing so
Why Google Sold Motorola
1. Google's mobile strategy is to get Android onto as many phones as possible, as almost all of the company's revenue comes from advertising,including on mobile devices. This is very different from Apple, BlackBerry, and Microsoft, which are all now integrated hardware-software businesses.
2. Google wanted Motorola for the patents, not for the manufacturing. Apple's patent attack on Android licensees was slowing down and worrying Google's customers. Motorola had a massive patent library that can be used defensively.
3. Once Google bought Motorola, some of its major licensees started hedging their bets and developing or buying their own non-Google OSes: Samsung with Tizen and LG with WebOS, for instance. They were worried Google would compete directly with them.
4. Motorola never made Google any money.
5. By ditching Motorola, Google can be a neutral, honest broker of operating systems to the world and make money doing so
Following excerpts from the sourced article will make it clear.
why sell Motorola Mobility to Lenovo after all this investment and makeover? Assuming that Google’s primary interest in Motorola had to do with its portfolio of patents that matches Google’s path to invest in technologies and its secondary motivation to prevent a single OEM (Samsung) from gaining too much power and control in the Android market, Google probably didn’t have a lot of interest in running Motorola as it falls a little far out of Google’s core business and focus which is within the internet platform, software, and certain technologies such as robotics and artificial intelligence. One suitable strategic choice was probably to hand Motorola over to a potential partner who has a focus on devices and will be able to secure a good position in the global Android devices market. One such potential partner was Lenovo, the Chinese company with a successful track record of penetrating the US personal computer market through the acquisition of IBM’s iconic personal computer brand. Lenovo had been trying to do the same thing with the US smartphone market while it had been successful in the emerging markets with its own brand. Lenovo had both the capacity and expertise to take Motorola and make it successful in different markets. Motorola is already an establish brand in the US and parts of Europe but not as competitive in Asia and emerging markets where Lenovo is established and the opposite was true for Lenovo. Therefore, handing Motorola over to Lenovo seemed like a good strategic move for both Google and Lenovo. Now Samsung can be hit at its home base; Asia and emerging markets as well as North America, something that perhaps Google would have had difficulties doing on its own.
So even though at first, the fact that Google bought a company for $12.5 billion, poured money into it, but then sold it for $2.91 billion to Lenovo might seem like a failure story, there are actually underlying facts and intents that potentially shaped those strategic moves, moves that their outcomes will be revealed in time.
Why?
On the surface having 81 per cent of Android marketshare would seem to make Google and Samsung best buddies. Samsung has been the driving force behind Android’s meteoric growth and put Google mobile devices in pole position.
The problem is Samsung wanted too much credit. It wasn’t enough for Samsung to make the most popular Android phones and tablets, it had to hide Android – and consequently Google’s role in its achievement. It did this using ‘TouchWiz’, the company’s proprietary skin which painted over all aspects of Android leaving it unrecognisable. To the casual consumer they were buying ‘a Samsung’, Google’s role was largely unrecognised.
Then things got worse. Samsung began degrading Android performance by switching out vast parts of the software – phone dialler, calendar, email client, contacts, notification center, music and video player, voice control and much more – for its own apps. Reviews were largely negative with TouchWiz and its bloatware slowing down Android, wasting storage space and the replacement apps were seen as inferior or, worse still, needless gimmicks.
Samsung then exploited this further. It put TouchWiz on its smart TVs, another market it dominates, and began building its own Android rival – Tizen – which, thanks to its TouchWiz interface, looks identical to the casual observer. The long term strategy was clear: switch over to Tizen and take the majority of the handset market with it. Google had to act.
How?
The ‘how’ was Motorola. On 15 August 2011 Google announced it had bought Motorola Mobility for $12.5bn in cash. With it Google acquired more than 20,000 mobile patents and publicly declared the purchase of the phone maker would not in any way compromise relationships with its handset partners… honestly, really, pinky swear.
Of course Google didn't expect handset partners to fully believe this and platitudes issued from them in reaction to the deal confirmed it. Should Google use Motorola to ramp up its own major handset business the market would be theirs. The phones would have stock Android and no-one, not even Samsung, could afford to subsidise their cost as Google can leveraging its mammoth advertising revenue.
The bait was set: obliteration by Google stock Android handsets unless manufacturers (read: Samsung) stopped messing with Android. Google quietly showed it could walk the walk as well as it ramped up Nexus production and introduced the well-received Motorola Moto X and Motorola Moto G which stripped away almost all customisation from stock Android.
Samsung bit. On 27 January 2014 Google and Samsung signed a wide-ranging global patent deal which will last a decade. Buried within it was an agreement that Samsung would tone down TouchWiz, refocus on core Android apps over its own customisations and cancel more radical customisations such as its ‘Magazine UX’ interface. Two days later Google announced the sale of Motorola Mobility to Lenovo showing both agreements had been working in parallel.
The consequences
The smack down for Samsung is twofold.
Firstly, despite its size and dominance of the Android market, Samsung has been brought back into line. No longer will Samsung run roughshod over Android’s design, kick out its apps in favour of Samsung alternatives and hide Google’s hard work underneath. Indications of a low key Galaxy S5 launch suggest it will stand by its word.
Secondly, the jump off point for Samsung from Android to Tizen is no longer straightforward. With Android shining through more strongly in future Samsung handsets it won’t be a seamless switch from one to the other. If Samsung wants Tizen to succeed it will now have to be earned rather than snuck in under the radar.
why sell Motorola Mobility to Lenovo after all this investment and makeover? Assuming that Google’s primary interest in Motorola had to do with its portfolio of patents that matches Google’s path to invest in technologies and its secondary motivation to prevent a single OEM (Samsung) from gaining too much power and control in the Android market, Google probably didn’t have a lot of interest in running Motorola as it falls a little far out of Google’s core business and focus which is within the internet platform, software, and certain technologies such as robotics and artificial intelligence. One suitable strategic choice was probably to hand Motorola over to a potential partner who has a focus on devices and will be able to secure a good position in the global Android devices market. One such potential partner was Lenovo, the Chinese company with a successful track record of penetrating the US personal computer market through the acquisition of IBM’s iconic personal computer brand. Lenovo had been trying to do the same thing with the US smartphone market while it had been successful in the emerging markets with its own brand. Lenovo had both the capacity and expertise to take Motorola and make it successful in different markets. Motorola is already an establish brand in the US and parts of Europe but not as competitive in Asia and emerging markets where Lenovo is established and the opposite was true for Lenovo. Therefore, handing Motorola over to Lenovo seemed like a good strategic move for both Google and Lenovo. Now Samsung can be hit at its home base; Asia and emerging markets as well as North America, something that perhaps Google would have had difficulties doing on its own.
So even though at first, the fact that Google bought a company for $12.5 billion, poured money into it, but then sold it for $2.91 billion to Lenovo might seem like a failure story, there are actually underlying facts and intents that potentially shaped those strategic moves, moves that their outcomes will be revealed in time.