Thursday, April 26, 2018
Business

Google's Motorola mistake could be Lenovo's boon

SAN FRANCISCO — An expensive mistake by Google could turn into a golden opportunity for China's Lenovo Group as it expands beyond its success in the personal computer industry.

Google is ridding itself of a financial headache by selling Motorola Mobility's smartphone business to Lenovo for $2.9 billion. The deal announced late Wednesday comes less than two years after Google bought Motorola Mobility for $12.4 billion in the biggest acquisition of Google's 15-year history.

While Google is backpedaling, Lenovo is gearing up for a major expansion. Already the world's largest PC maker, Lenovo is now determined to become a bigger player in smartphones as more people rely on them instead of laptop and desktop computers to go online.

Lenovo already is among the smartphone leaders in its home country, but it has been looking for ways to expand its presence in other markets, especially the U.S. and Latin America. The company had been rumored to be among the prospective buyers for BlackBerry Ltd. when that troubled smartphone maker was mulling a sale last year.

"We will be going from an emerging-market player to a worldwide player in smartphones," Lenovo CEO Yang Yuanqing said.

This marks Lenovo's second high-profile deal this month. The company announced plans last week to buy a major piece of IBM Corp.'s computer server business for $2.3 billion.

Buying Motorola will enable Lenovo to join Apple as the only major technology companies with global product lines in PCs, smartphones and tablets, putting Lenovo in a better position to become a one-stop shop for companies to buy all their devices from the same vendor, said Forrester Research analyst Frank Gillett.

"This makes Lenovo a company to watch," Gillett said.

For Google, the sale is a tacit admission that a company that prides itself on employing some of the world's smartest people miscalculated how much Motorola was worth. As part of the deal, Google is holding on to most of Motorola's more than 20,000 mobile patents, providing it with legal protection for its widely used Android software for smartphones and tablet computers. Gaining control of Motorola's patents was the main reason Google was willing to pay so much for a smartphone maker that was already losing money and market share. The Motorola patents were valued at $5.5 billion at the time Google took over, according to regulatory filings.

Factoring in everything, Google is taking about a $1.65 billion loss on Motorola Mobility. It's unclear if Google will have to absorb a charge to account for its apparent miscalculation of Motorola Mobility's value.

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