Selling Motorola, Google Exits the Handset Business

Motorolas Moto X, which has just arrived on these shores
Motorolas Moto X is just arriving in the UK, after a 2013 US launch 

Google is selling Motorola, which it acquired in August 2011, to Lenovo for $2.91bn (£1.76bn).

Lenovo will continue to operate Motorola as a distinct brand, as Google did, but the bigger news is what this move means for Google. With this sale, the search giant is essentially stepping out of the handset business, though it will still have the Nexus brand of devices produced by third-party manufacturers like LG and Samsung.

In a statement on the sale, Google CEO Larry Page emphasised that “this does not signal a larger shift for our other hardware efforts” – a reference to Google Glass, and its recent step into the connected home space with the acquisition of Nest.

“The dynamics and maturity of the wearable and home markets … are very different from that of the mobile industry,” he said.

In both of these “emerging ecosystems”, as Page calls them, Google has the benefit of being first to the party – at least compared to the smartphone market which, by the time Google entered it, was already “super competitive”.

The $9.6bn question
The Motorola deal, which saw Google pay $12.5bn for the manufacturer, closed in May 2012. So why did Motorola drop to under a quarter of its previous value in just 20 months?

Firstly, because Motorola wasnt making Google much money. In Q3, 2013, the Motorola division accounted for eight per cent of total revenues at $1.2bn – down by more than a third on the previous year – and made an operating loss of $248m.

According to Page, the original reasons behind buying Motorola were “to help supercharge the Android ecosystem by creating a stronger patent portfolio for Google and great smartphones for users”.

The former was identified as Googles main motivation at the time, with the manufacturer holding around 17,000 patents – the “vast majority” of which Google will hold onto after the sale to Lenovo and “continue to use to defend the entire Android ecosystem”.

But the question remains: were these patents alone worth $9.6bn to Google?