Motorola Sale To Lenovo Applauded By Analysts

Google’s decision to sell its Motorola Mobility unit to Lenovo in a $2.91 billion (£1.76bn) deal, was the right one according to many analysts.

According to them, Google’s move helps firm up its future direction, cuts its losses, and sets the company on a path that will be much more lucrative and game-changing than scrapping with competitors in the wild world of handsets.

Good Call

Those are the views of five mobile IT analysts who shared their insights into the latest Google bombshell in telephone interviews with eWEEK.

“It’s something that was bound to happen – the question was when and who” would buy Motorola Mobility from Google, said Chris Silva of Gartner. “It’s not surprising that it happened, and it’s also not surprising that it’s Lenovo. They needed a leg up so they could get on par with some of the other big hardware brands in smartphones.”

The sale by Google also makes sense because from the outset of the Motorola Mobility acquisition back in May 2012, many industry pundits were perplexed by the purchase, since it put Google at odds with partners who were selling their own Android devices in competition with Motorola’s offerings, said Silva. “It just didn’t work.”

In addition, the move makes sense for Google because the company’s really not equipped to be in the low-cost commodity market that the smartphone market is becoming, he said. “Lenovo is going to be able to play a better low-cost smartphone game than Google was ever going to be able to do,” said Silva. “These aren’t Bentleys anymore. They’re more like Honda Accords that we are buying as far as smartphones go today.”

Chris Hazelton, an analyst with 451 Research, told eWEEK that the sale to Lenovo fits in with a flurry of other recent news announcements by the two companies in recent weeks. On 28 January, Lenovo unveiled a major restructuring, with the company dividing itself into four business groups – PCs, mobile, the cloud and enterprise. On 27 January, Google announced a 10-year patent licensing agreement with handset maker Samsung, while on Jan. 23 Lenovo unveiled its plans to buy IBM’s x86 low-end server unit for $2.3 billion. And on Jan. 13, Google unveiled its plans to purchase connected home vendor Nest in a $3.2 billion deal that will help Google push deeper into the lives of consumers.

To Silva, the Motorola Mobility sale makes perfect sense as Google appears to be moving itself away from smartphones and into the direction of the Internet of things, such as the interconnections of vehicles, wearable computers such as Google Glass and in-home technologies.

“The ingredients are there,” he said. “They have the patents, and they’ve directed the Android ecosystem. The next area of focus will be the Internet of things. They’ll be putting together all of the Android devices out there and connecting them to Nest [products in people’s homes]. They have the house, they have the car. They don’t need the smartphone because they have the applications and the operating system.”

Patent Value

Maribel Lopez, principal analyst with Lopez Research, said the sale to Lenovo is the right course for Google. “Frankly, I’m shocked that they didn’t do it shortly after they bought the whole thing. They’re not a hardware company,” she said of Google. “I never thought they were going to be in the hardware business. I thought they’d keep it long enough to prove they didn’t just buy it for the patents [received from Motorola in the acquisition by Google] and then spin it off.”

Dan Maycock, an analyst with OneAccord Digital, said those Motorola patents, which Google valued at some $5.5 billion (£3.3bn) when it acquired the company, will still be valuable to Google even after the sale of the unit to Lenovo. The company has already announced that the majority of those patents will remain with Google.

“They’re keeping something they needed when it comes to patents,” said Maycock. “I don’t think they’re going to leave empty-handed here, and that’s really why they bought the company” in the first place. “Since Google acquired Motorola, they have built some great handsets, and now they’re sending them off to the next guy. I think they got out of it what they wanted.”

Smartphone Experiment

Another analyst, Jack Gold of J. Gold Associates, said that in addition to those desired patents, Google also got Motorola’s smartphone expertise when it originally bought the company. But that wasn’t enough to keep Google in the smartphone business for the long term, he said. “I never saw Google being a vertically integrated, womb-to-tomb hardware provider, unlike Apple, which has the full stack.”

Google couldn’t play in that game with Android, said Gold, because of the uncomfortable position it was in as a competitor to its Android partner vendors. “That’s never a good position to be in,” he said. “With the sale of Motorola Mobility, now it is clean with no conflicts. It served its purpose. It’s time to get rid of it.”

For Lenovo, the deal is also a smart one, he said. “Lenovo gets to buy into a major brand with still substantial channels outside of Lenovo’s primary mobile presence in China. And it gets an engineering staff that knows phones for worldwide sales. This is a win for Google and a win for Lenovo in my opinion.”

Gold called the $2.91 billion (£1.76bn) price tag for Motorola Mobility a relative bargain for Lenovo. “Lenovo is amassing its acquisitions to be a full line player, and it has Hewlett-Packard – and to a lesser extent Dell – directly in its sights. IBM could be next. I don’t think Lenovo is done yet with acquiring markets and market share companies. And it’s making them a worldwide player ahead of its local competitors such as Huawei, ZTE and Xoambi.”

Motorola Deal

The sale of Motorola Mobility was unveiled in a Jan. 29 post from Google CEO Larry Page on the Google Official Blog as “an important move for Android users everywhere” because it will help advance the brand and its devices. By selling the company, Motorola Mobility’s handset business will now be propelled by Lenovo, which already has a thriving handset business, rather than operating as a side business in the shadow of other work being done by Google, wrote Page.

“This move will enable Google to devote our energy to driving innovation across the Android ecosystem, for the benefit of smartphone users everywhere,” wrote Page. “As a side note, this does not signal a larger shift for our other hardware efforts. The dynamics and maturity of the wearable and home markets, for example, are very different from that of the mobile industry. We’re excited by the opportunities to build amazing new products for users within these emerging ecosystems.”

Lenovo has lots of experience in hardware, as well as a global reach, which are both needed in the handset arena, wrote Page. “In addition, Lenovo intends to keep Motorola’s distinct brand identity – just as they did when they acquired ThinkPad from IBM in 2005.”

Google had already begun selling off parts of Motorola Mobility within months after it acquired the company. In December 2012, seven months after the original purchase, Google sold off the Motorola Mobility Home unit for $2.35 billion (£1.4bn), according to an earlier eWEEK report. The Motorola Home division, which was acquired in the deal by Arris, sold set-top boxes for consumer cable television services.

Google had put the Motorola Home unit up for sale in late August 2012, just a few weeks after it announced the layoffs of about 4,000 workers there, which was about 20 percent of the workforce. The job cuts came along with the closing of 30 of Motorola’s 90 facilities around the world and were unveiled just three months after Google acquired the company.

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Originally published on eWeek.