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How 'Lenovorola' changes the mobile world

Mike Elgan | Feb. 3, 2014
Google is selling Motorola to Lenovo. The deal makes Google better, Lenovo bigger and Motorola gets a new lease on life.

You may have heard that Google sold Motorola Mobility to Lenovo. Although that's not exactly what happened, the transaction will probably change the mobile industry completely.

First, let's be accurate about what transpired.

Two years ago, Google acquired Motorola Mobility for $12.5 billion. And, yes, this week Google announced its intent to sell Motorola Mobility — for $2.3 billion.

But Google didn't sell everything it bought. Google basically stripped the acquired entity for parts and kept the most important bits: 15,000 of Motorola Mobility's 17,000 patents.

Before selling the handset business to Lenovo, Google had sold Motorola Home, the company's TV set-top box business, to a company called Arris for $2.6 billion a little over a year ago.

The Motorola Mobility patent portfolio gave Google, as the creator of Android, an immediate short- and long-term advantage in the ugly patent wars that plague the mobile industry. Google was instantly able to defend itself against Apple and others in the courtroom. (Google has valued Motorola's patents at $5.5 billion.)

As part of the original Motorola acquisition, Google also bought Motorola's innovative advanced research and development group, currently headed by the former head of the U.S. military's research and development wing, Regina Dugan. The group is famously working on modular smartphones, electronic tattoos and smart pills. Yeah, Google's keeping that group. (Oddly, it's keeping the R&D division in the Android group, rather than folding it into its own Google X labs.)

The sale also gives Google five benefits generally unnoticed in the popular accounting.

First, Google gets to stop losing money on Motorola. The Motorola unit cost Google nearly $1.3 billion last year. Selling the unit may have saved Google the loss of another billion this year and maybe another billion after that.

Second, the sale will improve Google's relationship with Samsung, the world's biggest smartphone maker and the company that makes about one-third of the world's smartphone handsets. Now that Google is no longer a direct competitor, Samsung can pursue less ambiguous policies around its apps, its interfaces and its alternative operating system ( Tizen). Already, some observers are suggesting that the agreements between Google and Samsung announced this week — in one case an agreement to make Samsung's new Magazine UX interface more Google-apps friendly, and in the other case a deal to cross-license patents between the two companies — may have been based on the knowledge that Google was selling Motorola.

Third, it's possible that Google now has a friend in China. Google's search engine market share in China is only 1.6%. Just 3.5% of Android devices in China use Google's Play Store. Although Android dominates the Chinese smartphone scene, Google is a marginal presence there. The Motorola sale involves giving Google a roughly 5% ownership in Lenovo. It seems likely that Lenovo will offer Google services and apps and the Play Store on its Chinese phones, even as Lenovo grows to dominate the market there.


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