Search engine giant Google, Inc. (GOOG: Quote) agreed Wednesday to sell its Motorola Mobility smartphone business to China's Lenovo Group Ltd. (LNVGY) for about $2.91 billion in order to focus on Android. The deal is subject to regulatory approval by both U.S. and China.
The consideration includes $660 million in cash, $750 million in Lenovo ordinary shares, and the remaining $1.5 billion to be paid in the form of a three-year promissory note.
"The acquisition of such an iconic brand, innovative product portfolio and incredibly talented global team will immediately make Lenovo a strong global competitor in smartphones. We will immediately have the opportunity to become a strong global player in the fast-growing mobile space," Lenovo Chairman and CEO Yang Yuanqing said in a statement.
The move comes just under two years after Google acquired the spun-off handset business of Motorola in May 2012 for $12.5 billion, in what was its largest-ever deal. The sale ends Google's short foray into the mobile hardware devices market.
Though Google has lost a hefty sum in the process, it is already cashing in on Motorola's treasure trove of more than 17,000 patents, a majority of which it will retain, including current patent applications and invention disclosures. It also sold Motorola's cable television set-top box business to Arris Group, Inc for $2.35 billion at the end of 2012.
The proposed deal is the largest-ever tech deal by a Chinese company and Lenovo's second major deal in the U.S. in a week after it agreed last Thursday to buy low-end server business of International Business Machines Corp. (IBM) in a $2.3 billion cash and stock deal. Lenovo had in 2005 forayed into the world's largest PC market by buying IBM's PC division.
Lenovo is a relatively new entrant into the smartphone market and is currently trying to expand its negligible market presence in the booming smartphone business. The deal will enable Lenovo to gain a strong foothold in North America, Latin America, and Western Europe with Motorola's recently launched Moto X and Moto G Android smartphones. The deal will also complement its presence in emerging markets.
The deal will also help Lenovo to better compete with smartphone market leaders Apple, Inc. (AAPL) and Samsung Electronics Co. Ltd. (SSNNF, SSNLF) as well as Chinese smartphone makers in the highly lucrative U.S. market.
Lenovo is expected to use Motorola just as its used the IBM PC brand to gain rapid credibility and reliability in the market place. The deal will provide access Motorola brand and Motorola Mobility's portfolio of smartphones like the Moto X and Moto G and the DROIDTM Ultra series.
Motorola Mobility is currently the third leading Android smartphone manufacturer in the U.S. and Latin America.
Meanwhile, Lenovo will receive over 2,000 patent assets, as well as the Motorola Mobility brand and trademark portfolio through the deal.
The deal will also see Lenovo receiving license to Motorola's remaining portfolio of patents and other intellectual property. Further, the deal should reduce potential friction between Google and hardware partners that use its Android operating system.
"Lenovo has the expertise and track record to scale Motorola Mobility into a major player within the Android ecosystem. This move will enable Google to devote our energy to driving innovation across the Android ecosystem, for the benefit of smartphone users everywhere," Google CEO Larry Page stated.
GOOG closed Wednesday's regular trading session at $1,106.92, down $16.09 or 1.43% on a volume of 2.01 million shares. However, the stock gained $23.79 or 2.15% in after-hours trading. In the past 52-week period, the stock has been trading in a range of $750.25 to $1,167.89.
LNVGY closed Wednesday's regular trading session at $27.86, up $0.96 or 3.57% on a volume of 0.11 million shares.
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by RTT Staff Writer
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