Last week, Google announced the $2.9BN sale of Motorola Mobility to Lenovo. At first glance, a $2.9BN sale for a business which cost Google $12.5BN just two years ago looks like a head scratcher at best and unmitigated disaster at the extreme. Upon closer examination, kudos goes to Google – acquiring an (i) impressive patent portfolio, (ii) solid manufacturing partner and (iii) timely strategy for software distribution.
Let’s start with the math – the $12.5BN price paid for Motorola Mobility is not nearly as steep when considering the $2.9BN sale to Lenovo, $2.4BN in divestitures , $3.2BN in cash acquired to cushion $2BN in losses and $2.4BN in deferred tax credits. In addition, Google ends up with the following:
- Impressive Patent Portfolio may have been the catalyst for the transaction in the first place, responding to the Microsoft / Apple / RIM acquisition of Nortel patents for $4.5BN. After watching the Samsung / Apple patent saga, it is hard to discount the value of mobile patents.
- Solid Manufacturing Partner: With a track record for turning around IBM’s PC manufacturing business, Lenovo may provide manufacturing expertise and potentially scale for Android handsets and down the road, PCs. Take a look at the Lenovo Yoga tablet; you may stop and stare at the great design, overlooking whether you are holding the Microsoft Windows or Google Android version. Finally, Lenovo may provide a nice counter-balance, alleviating concerns for over-reliance from the Samsung Android partnership.
- Time Strategy for Software Distribution: When it comes to handsets and PCs, Apple builds their own; Microsoft traditionally has broadly partnered — becoming the arms dealer in the PC manufacturing wars. Microsoft has enjoyed an enviable position for years; however, this is changing with a renewed focus on device manufacturing – including Microsoft building Surface tablets and the pending $7.4BN acquisition of Nokia mobile manufacturing assets.
You do have to hand it to Google; they have deftly become the de-facto independent software provider to manufacturers – an unattainable position just a few months prior. Microsoft opened an enviable perch to Google when jumping into manufacturing of phone, tablets and perhaps one day PCs. With nearly 50,000 employees and $60BN in revenues, Google is still agile to jump up onto that perch in a matter of months from the Nokia announcement.
Anticipate increasing competition and alternatives for handset, PC and tablet operating systems, particularly in the consumer market where Google and Apple will fight it out.