Motorola

After selling different business units and holding onto an array of patents, Google made a seemingly-sound business decision

Google selling off Motorola to Lenovo this afternoon came about as far out of left field as anyone could have imagined. On top of what this potentially means for the future of Motorola's products as well as Google's aspirations in the hardware business — two things we are far from understanding at this point — there's an interesting financial side to this deal.

Motorola was purchased by Google at the end of 2011 (with the deal closing in the Spring of 2012) for a pretty hefty $12.5 billion. That's a large delta from the $2.91 billion that eventually changed hands between Google and Lenovo today, but those two numbers don't quite tell the entire story.

Considering Motorola's handset portfolio and sales leading up to the point when it was sold to Google, the assumption was that a big chunk of that $12.5 billion was for the company's patent portfolio. Indeed, Google valued Motorola's vast array of patents at a sizeable $5.5 billion shortly thereafter. It makes sense then that Google chose to hold onto these patents when it eventually sold every other part of Motorola to Lenovo.

So $2.91 billion from Lenovo, plus $5.5 billion worth (to Google) of patents. That's $8.41 billion of value, which comes up short of the $12.5 billion it paid initially. But in the end, Google didn't finish the deal $4.09 billion in the hole — there's far more to this balance sheet.

Keep what you need, sell what you don't

Moto G

First and foremost, Google's purchase of Motorola wasn't an instant throwing of cash into a dumpster. That $12.5 billion transaction instantly pulled $2.9 billion in cash from Motorola's coffers over to Mountain View — something that was undoubtedly factored into the purchase price. Google also picked up some favorable tax-deductible assets as well as the opportunity to amortize many of Motorola's capital expenditures, but considering that Android Central isn't an accounting firm, we won't factor these into our assessment.

In the months following its acquisition of Motorola, Google then quickly trimmed off the parts of the long-standing hardware company that it had no need for.

If you follow the math, Google at this point was about $1.235 billion ahead.

In December of 2012, Google sold off the entire set-top (or "home") division of Motorola to the Arris Group for a cool $2.35 billion. It makes sense that Google had little use for the portion of Moto that made cable boxes — despite speculation to the opposite — and at that price, it recouped a good portion of that initial $12.5 billion outlay.

In a much smaller but still significant transaction, Google sold Motorola's Chinese and Brazillian assembly plants to manufacturer Flextronics for about $75 million in April of 2013. As it turns out, those chains would have been somewhat redundant considering Motorola's move to using U.S.-based assembly for the Moto X.

If you follow the somewhat-rough math — nothing can be precise considering the fact that not all of these deals were done in cash — Google at this point was about $1.235 billion ahead on the Motorola deal if you still trust its $5.5 billion valuation of the patents to be true.

The cost of running Motorola

Google

But of course Google-owned Motorola wasn't just sitting around collecting dust this entire time. When the two companies came together, Motorola was still producing handsets for countries around the world and carriers here in the U.S. It had about 20,000 employees at the end of 2011, and while that number quickly reduced to about 4,250 by the end of 2013, there were still great costs associated with running Motorola.

From Q2 '12 to Q3 '13, Motorola racked up $1.974 billion in operating losses for Google.

Then there's the Moto X and Moto G. Google spent millions in R&D, marketing and manufacturing for these two devices, the ones that were supposed to jumpstart Motorola's comeback in the smartphone space. Based on Google earnings reports, Motorola ran an operating loss of $233 to $527 million every single quarter it was under the Google umbrella.

From Q2 2012 (the first quarter Motorola was included on Google's earnings) to Q3 2013 (we'll hear Q4 2013 tomorrow), Motorola racked up $1.974 billion in operating losses for Google. And while that's not a gigantic number in the grand scheme of its greater business, it's pretty significant in the context of this sale. Also keep in mind that Google still didn't expect Motorola to return to profitability for several more quarters.

Taking that $1.974 billion away — you can't recoup those losses — from our previous assumption of Google being about $1.235 billion ahead, we see a modest loss on Google's acquisition of Motorola to the tune of $739 million after running the company for nearly two years. That's a dramatically lower number than anyone may have thought at first glance, and when you take into account the knowledge Google gained from running its own device hardware business for two years, I'd say it was a pretty darn good price to pay for an experiment.

 
There are 172 comments

Mpearce25 says:

I still wish they didn't sell Motorola, especially to lenovo. I could have seen them using moto to make some great projects such as a smartwatch or a nexus device from Motorola.

G2

radgatt says:

With these rumors going around that Google is killing off the Nexus line of phones after this year it would be nice if Motorola made the last Nexus as a farewell to both the company being sold and the Nexus line going away.

Kvoth says:

Those rumours have been around since the first GPE device, some Russian blogger tweeting it doesn't change anything. There's never been any evidence of it, and if anything selling off Motorola makes it even less likely.

mwara244 says:

I wonder how much of a role Samsung had in this Google getting rid of all hardware production in cooperation with Samsung and them stopping Tizen. It looks like Samsung didn't like Google's direct competition in the mobile hardware market and got them to dump Nexus and Motorola in one fell swoop to keep Android from losing Samsung and a cooperation of patents and software together.

If Nexus goes,I am dumping Android for Apple

Posted via Android Central App from Nexus 7 2013

SEGROUKIN says:

And don't forget to shut the door behind cos it's your loss.

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Dragan Cake says:

Have fun with your tiny screen, mid range hardware, lack of multitasking, no true filesystem, closed system, etc, etc, etc....

In other news, even my grandmother thinks her old iphone (4s) was a "crappy limited phone" since I got her an s3 last year when her screen had broken.

cosmin_ss says:

and u,have fun with your laggy plastic piece of sh!t.

arrigob says:

Laggy.......no lag here on my moto x.

Posted via Android Central App

cosmin_ss says:

ok :)

brendilon says:

You're talking about the GS4, right?

Posted via Android Central App

cosmin_ss says:

you are right,Samsung phones are laggy as hell...
You all are Android power users,please tell me how a company as big as Samsung can put on the market a 700$ phone with such a laggy OS?
how can u buy such a phone when there is HTC One,Nexus 5,Z1...and even LG G2 on the market.
i am an Apple power user...and i dont understand how u can buy that junk...and they are No 1 worldwide... incredible

poglad says:

Eh? Nobody mentioned the iPhone 5c?

frettfreak says:

Thats cause we can talk all the crap we want... but the iphone is not laggy. I am an android fan til i die, will never go to apple (even if they manage to kill android...which wont happen) but lets be real here... the iphone may be a lot of things, but laggy isnt one of them.

joramteusink says:

An iPhone 4 running iOS7 is laggy.

Posted via Android Central App

cosmin_ss says:

true,but i4 is from 2010...now name an Android phone from 2010 with Kit Kat.

805peej says:

The Galaxy S and the Galaxy Ace both have stable Roms of KitKat. All I know is that my work just had to fork out thousands and thousands of dollars to replace all of our iPads because they can't run any apps (or even the newest iOS... sounds like FRAGMENTATION!!!!)

JHBThree says:

So you're trying to prove what exactly? I mean, if they can't be upgraded, that means they're the original 1st generation iPad, which came out FOUR FUCKING YEARS AGO!

Not to mention that those stable ROMs you're talking about were put together by the ROM community, not by Samsung, and that the Galaxy S and Ace both stopped getting updates after Gingerbread. (2 years ago)

So what is it you were trying to prove?

cosmin_ss says:

what is wrong with the 5c?

Jamaar White says:

As I.

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gripplies says:

That would back the thing to do make the final Nexus with your own hardware Phone, Phablet and Tablet in all sizes(7,8,10, 12). Throw in a Chromebook and a Watch since you are giving up the Project Ara. Because really all Moto needed was a software blueprint, Pure over Blur did the trick.

frettfreak says:

Google kept the group responsible for Ara. :)

Don't forget the tweet that claimed the Nexus line was going away was based on the fact that Google owned Motorola.

cosmin_ss says:

nope,was based on Google - Samsung partenship deal.

TurboFool says:

May I ask why especially Lenovo? I feel like Lenovo's drive, attitude, and focus on minimal, lightweight enhancements to innovative hardware goes really well with Motorola. Honestly, while I'm really concerned about the sale, Lenovo's one of the companies I'm LEAST upset about. If it went to HP, for instance, another PC manufacturer who keeps trying and failing, I'd wash my hands entirely.

drokssilva says:

+1 agreed.

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polarimetric says:

If this was about PCs, I'd completely agree. The trouble is that Lenovo's PC business and their mobile business are two very different animals--their PCs are largely respectable while their mobiles are usually unappealing mid-range devices with unhelpful Android UI OEM "enhancements." The concern I and most others have is which company Lenovo+Motorola will more closely resemble. If Lenovo is acquiring Motorola to make its mobile business more like Motorola, then more power to them; things will be great. If Lenovo is acquiring them just to get their brand assets, though, and is just planning to re-brand their existing devices with the Moto name to sell in North America, things will be less great.

TurboFool says:

Right, but that's kind of the POINT of acquiring Motorola. To gain the advantages Motorola has in place already. Lenovo isn't stupid. They've proven that time and again with their other markets. I have no idea what parts of this they may still screw up, and I'm not exactly HAPPY about this sale, but I think it's shortsighted to think them merely rebranding crap as Motorola is likely.

polarimetric says:

Oh, no, don't get me wrong--I agree with you. I think Lenovo would be insane not to leverage Motorola's brand renaissance and use the acquisition as an opportunity to improve their mobile offerings, and as you say, they've proven that they're not insane in other markets. I'm just playing devil's advocate because I know people are concerned that Lenovo /will/ just rebrand crap as Motorola, and I can't necessarily guarantee that they're wrong, even though I see it as unlikely.

NoNexus says:

Motorola is a quite a few billion in the hole, you don't think that Lenovo will be adding improvements?

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D13H4RD2L1V3 says:

Totally agree.

+1

7seven says:

This!

I recently bought a Vodafone Smart Tab III 10" (which is in fact a Lenovo tablet: http://www.gsmarena.com/lenovo_ideatab_s6000-5354.php) and I was really impressed by how nice it looks and how well it performs at a price under 200 euros (~270 usd). After all, it's a 10 inches tablet with quad core processor.

Dean Willett says:

I can definitely see this as another play by Google to further penetrate emerging markets such as China (Lenovo is Chinese). Android is already vastly popular in China, but many would argue that this is because they are buying very cheap android phones, and many don't actually have access to Google. By selling a company such as Motorola to a Chinese company, they open the door a little wider. Just as Hugo Barra moved to China, they are realizing that China and other countries are the future and are trying to secure that market from the very beginning.

I am glad to see people made to be snapped into reality.

To many people jumped on this bandwagon having NO DIRECTION just feeling like they needed to do something which was stupid.

Motorola has been a NON FACTOR and a total JOKE on the android platform for over 5yrs before Google bought them.

It's pretty Plain and simple Motorola was peddling those Optical illusion devices trying to make people think that specs didn't matter but group discounts and price breaks was king.

Oh well now things can return back to normal for a change NO MORE MISLEADING people.

Posted from my Galaxy Note 3 on Tmobile via Android Central App

squiddy20 says:

1. At least half of what you just said makes absolutely no sense. No one is "being snapped into reality", and Motorola was definitely *not* a "non factor". Sure, they might not have had the amount of sales as say Samsung, but that doesn't mean their latest products weren't amazing. Plain and simple, you're delusional. Period.
2. You keep using the words "optical illusion devices". I don't think it means what you think it means. Time to go get a dictionary Dicky.
3. 2 years ago, specs *did* matter partly because Android was poorly optimized and resource intensive, and partly because the hardware just wasn't there. Now, Motorola has *proved* that with todays specs, an octo-core processor dedicated to the entire OS is not necessary. Their implementation, even with lesser hardware, runs just as well as that "pimp slapping" Note 3 you have. Also, look at the iPhone. It has less RAM and a less powerful processor than an S4 but still runs just as smoothly, if not better. Just another mindless spec whore who thinks "MOAR IS BETTTTAAAAAARRRR!!!1!!". Just like you think a 16MP camera takes better photos than a 12MP camera.
4. Finally, I find it hilarious that you won't shut up about "group discounts" and people thinking "price breaks was king" (which in itself doesn't make any grammatical sense), while you're on T-Mobile, the cheapest of the big 4 carriers. If you are the "big spender" and are indeed "rolling with the big dogs" as you claim, you wouldn't have "kicked Verizon to the curb" because of their high prices. What a hypocrite.

5yrs?
I beg to differ!

I've only one word for you ... OK two words :) ... Motorola Defy.
If that alone isn't enough, another word ... 265ppi. Even now many mid range devices don't have that kind of display!

Strategically, I guess this is a good move for Google: they probably don't want to be in the product business anyway -- they want to sell services. But, personally, it would have been nice to see what kind of handsets Google-ola (Moto-oogle?) might have come up with in the future.

icebike says:

It might not be entirely by choice.

Four weeks ago, Samsung leaked a Tizen phone. Their rumored OS replacement for Android.

Two days ago Google and Samsung signed a 10 year broad patent cross license agreement.

Today, Google steps out of the hardware business.

Coincidence? Probably not.

There was already press rumblings, even here on AC, about unhappiness among the the manufacturers with Google making Android and making phones as well. The Tizen was a shot across their bow. It was probably a proof of concept, but it got Google's attention.

I bet it never sees the light of day. Google agrees to get out of the hardware business, Samsung quietly buries the the Tizen.

Every body cross licenses everything and nobody gets hurt. All friends again.

singelectric says:

Well, except for the fact that mere support by an OEM can't make a big dent in the mobile platform landscape. If it could, MS/Nokia would have figured out a way to sell a lot more handsets.

I do think you're right about the patent deal being inked the day before this went through, however.

icebike says:

Agreed. But since we are just speculating, I could see the biggest manufacturer on earth pulling a sizable market share if Tizen was any good, and could port Android apps.

CmbtSwmr7 says:

+1 I think you just captured the missing piece of the puzzle.

To say Google bought Moto just to pick and choose the patents they wanted, only to give the rest away, is conceding too much of the

I think further evidence of this exists in how Google tip-toed around ensuring that Motorola and Google will always remain separate companies and they would never get involved in handset development. For a company that everything under a cloak of secrecy, this was shouted too loudly to not be an obvious tell.

But you're right, it was still too close to home for the big players and Google had to choose the lesser of evils and "chop shopped" Motorola to a company that would pose no future threat to them.

All in, well played Google.

TyrellNexus6 says:

I wish that part of this agreement might be that Google green-lights Samsung to make another, AND BETTER, Nexus phone. For Verizon customers, there has only been one Nexus (so called) device, and we all know how that turned out. The Moto X is the closest we've come to having really good Nexus-like phone...hoping that if Google and Samsung are really this much in bed together then a genuinely respectable Nexus phone (GSM and CDMA) might come from that association in the near future.

brendilon says:

Not getting a Verizon Nexus has absolutely nothing to do with anyone except Verizon. Just look at the shit VZW pulled with the Nexus 7 2013.
Screw VZW.

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Ry says:

Love the analysis.

I wouldn't call the plants sold to Flextronics redundant though. Not all Moto X are made in the US and AFAIK none of the Moto Gs and 2013 DROIDs are assembled in the US either.

Posted via Android Central App

Thanks glad you enjoy the analysis.

But yes, very true. I clearly made the decision to day "somewhat redundant" for this reason. Nevertheless it was likely inefficient for Motorola to have it's own manufacturing plants when it had dramatically scaled back the number of phone models it was producing under Google.

Posted via Android Central App

In fact Google could incur some losses but they are by far lower than some of the more sensationalist bloggers suggest. If you include tax-deductible assets and other things we can only speculate about, it might happen that the loss was relatively small, in the "Google / Lenovo"-size-of-business meaning, of course :)
Very good editorial, congrats!

radgatt says:

I'm still not a fan of the acquisition but I am no expert on the move. I'll admit and say that since this all has transpired that it has impacted my decision for my next smartphone. I am not sure that I can trust Lenovo. Google said that Motorola would run as a separate company when it was owned but at the same time you saw the Google influence with the software. Even if Lenovo says that Motorola would run as a separate company I can't help but think that there will be a Lenovo influence with the software. That's the part that scares me.

TurboFool says:

Working in IT and using Lenovo products heavily, I can say that Lenovo is the Motorola of the computer world. Their software additions these days are light, minimal, and geared to accentuating rough spots and tuning performance and battery life. They're unobtrusive and clean. My Yoga 2 is fantastic. I barely see ANY Lenovo presence on it. That should merge well with Motorola's existing philosophy.

Ry says:

Boom.

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SEGROUKIN says:

Spot on!

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wsmather says:

Thank you!

JHBThree says:

Their smartphones are a completely different case. Skinned (poorly) from top to bottom.

CmbtSwmr7 says:

Agreed. We need to be cautious to not treat Lenovo PC and Mobile departments as one and the same.

I think this was potentially damaging to Motorola in the long run.

TurboFool says:

Which is EXACTLY why them buying a company who knows how to make good phones and using THEM as their front for operations makes so much sense to them. Their previous attempts have failed. So they're buying someone who's good at it. If their goal is just to replace all the Motorola influence with their own hardware and philosophy, there's little gain to buying the company. Sure, the name, but it'll take less than ONE generation of terrible phones under that name to sink it instantly. Lenovo isn't dumb.

JHBThree says:

Yeah, that's not why they bought them.

MonteChristo says:

I'm of the same mind. The only reason I've been looking at buying a Moto X for my wife and I instead of a Nexus is because Moto has shown good taste with their additions to the OS and because of the deliberate speed they demonstrated in getting their devices updated. With Lenovo at the helm, that all gets tossed up in the air.

Experience has taught not to trust what manufacturers say when it comes to updates and instead watch what they do.

Now I'm on the fence of getting a Moto X for the wife, and am leaning towards a Nexus 5 for myself.

fldude99 says:

I'm concerned that the Chinese authorities, operating behind the scenes, could rig future devices sold in the US for who knows what nefarious purposes. They are not an ally in the sense that Japan, S Korea, etc are.

TurboFool says:

Good thing Android is open source, and all manufacturers of Android devices are required to release their source code, then.

NoNexus says:

So where is the SDK for Sense 5 so I can see what it records?

Android is Open Source, the skins and apps are not. Including the one on the Nexus

TurboFool says:

And yet when CarrierIQ and other apps blare information out, our communities somehow always manage to catch it. Regardless of whether additional elements are closed source, they get caught. It's not that easy to hide it anymore.

Also, Lenovo's THE company for corporate environments these days. They can't get away with this if they expect to be adopted by large companies. They vet their stuff carefully. One teenager in his bedroom manages to sniff a few packets and find out what they're up to, and a dozen multi-million-dollar contracts go out the window. Lenovo is a business, first and foremost.

NoNexus says:

It was a stand alone app with no other purpose but to phone home. Putting Carrier IQ inside something designed to do just that would "mostly" mask it.

Android is not all that open.

drokssilva says:

Were already being tracked by our own government. And our government is tracking people outside of the US. China is just as bad (or worse), but were being tracked just as much by any government.

I don't think china will care much about your porn watching NoNexus.

I may be wrong.

But as the other commenter said if any of this was ever caught Lenovo would go out the fucking window. Nobody would trust them.

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NoNexus says:

Hey my midget donkey porn is on a public drive, I am not the paranoid one.

Others have been caught keeping info, nothing really came of it.

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This post approved by the NSA.... at least I hope so.

Masheen says:

lol how do you live with yourself

jdbii says:

If those patents are worth 5.5 billion..........is a pretty big if. Only time will tell.

JHBThree says:

They're not. They've proven to be duds in the courts.

brendilon says:

No, actually, they haven't been. You DRASTICALLY underestimate the value of the patents Motorola holds. We're not talking design bullshit like Apple holds, we're talking about foundations of cellular devices. They're considered essential, so Google will be required to license them, but that also means every manufacturer will be required to pay for that license.

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JHBThree says:

You must have missed the part where google tried to extort $4 billion for SEPs from Microsoft and only got $1.7 million. Motorola's patents are not remotely worth what google thought they were.

acedzero says:

Correct me if I'm wrong, but since Google retained most of Moto's patents, it seems to me that maybe the next Nexus device might have some of the features that are unique to the Moto X now like Active Display, Touchless Control, etc...

On a totally unrelated note, I am a phone/tablet junkie. I've gone though most of AT&T's flagship phones in the last year including the Note 2, Note 3, Galaxy S4, Galaxy Mega 6.3, HTC One, Lumia 1020, and iPhone 5. Interestingly, I tried the Moto X twice. Once on launch, then shortly after they fixed issues with the radio and camera. The second time around I wasn't too comfortable with the 16GB of memory so I got a LG G2. Got bored with that after about a month and decided to get a Dev Edition Moto X, mainly because of the 32GB memory and easier to root.

I just got the Dev Edition today and this happens... I can't seem to win LOL.

Grahaman27 says:

Nexus devices won't have those features because they are reference devices, you don't want to include features like active display and touch less control in stock android if most other phones don't have the right hardware for it.

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TurboFool says:

Except... the Google Experience Launcher is exclusive to the Nexus 5 because of its unique hardware features. So Google's already broken that pattern.

tatltael says:

The GEL does not require special hardware to run at all. Any phone can run it. My nexus 4 is running it now. It's just another launcher.

SEGROUKIN says:

Sarcasm maybe?

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TurboFool says:

Wrong. Any phone can run it, but they all experience battery life hits from it that the 5 doesn't.

JHBThree says:

The only extra hardware features that the Nexus 5 has is a low-power processor for language recognition. (similar to the Moto X) It is not required for the Experience Launcher to work, and it does not mean that the launcher will not work on other devices.

TurboFool says:

Didn't say otherwise. What I did, clearly, say is that it's exclusive to the Nexus 5 because of its specific hardware, which makes the Nexus NOT pure AOSP. The GEL requires the low-power processor in order to use that function without a hit to battery life. Yes, it will run on other devices, no, it has NOT been released on other devices. My point remains the same.

JHBThree says:

GEL does not require that processor. Which is why it works perfectly fine (and without a hit on battery life) on other devices.

ab304945 says:

The nexus doesn't really run pure stock android

Walkop says:

That's basically like saying the Surface doesn't run stock Windows, its "Microsoft's take" on Windows.

Those arguments never made sense to me. Google created Android, and releases Nexus based directly on AOSP with only app additions. The codebase is the same.

Just because Surface includes Microsoft Office doesn't mean it isn't stock Windows.

NoNexus says:

ok the code base for the Galaxy S4 is basically the same with app additions.

drokssilva says:

Yeah. All manufactures actually work the same way. The overlays work like apps. Its still android underneath.

The only way its not is with forks like KindleOS.

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Sven Frenzel says:

Actually KindleOS has the same VM running underneath everything.. It's the same OS. They've just thrown out EVERYTHING Google and replaced it with Amazon...

+1!

Posted from my Moto X

brendilon says:

That depends on what you mean by a reference device. To some that means baseline. But the Nexus line isn't a baseline phone, it's a premium device sold at mid market prices.
You could also look at a Reference device as Best Practices, which is more in line with what Google has done (non-removable battery, no SD card, minimal skin, high quality display, high quality design). In that case, then Active Display, Touchless Controls and low power, always on processors are definitely a best practice and in line with the Nexus concept.

Posted via Android Central App

Great breakdown Andrew.

The more and more I read, and think about this deal, the more I see why the Nexus 5 was another LG device and not from Motorola.

Seems Google was obviously more interested in the patent portfolio than the hardware side.

I am real interested in seeing what Lenovo does with their purchase and what devices Motorola has in the development cycle right now that we will soon be seeing.

appmy says:

Google is divesting to buy Blackberry. They also gave Lenovo an advantage to combat Samsung.

It may be win win for Google. Only time will tell.

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NoNexus says:

what advantage is that?

*citation needed

erjennin says:

Buy blackberry? Advantage to Lenovo? Tell more....

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Blackberry hard pressing keys, but Lenova a new edition comes up with a cheap price tag. http://wp.me/p3zd1e-1gQ

Paola1993 says:

So they were basically experimenting with me and my money?

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Grahaman27 says:

Your money? Google? The ad company?

Its not like you pay taxes to them lol.

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Paola1993 says:

Moto X isn't free.

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TurboFool says:

I'm sorry, did they take away your Moto X? Did this buyout include a mandatory product recall without reimbursement that I didn't notice?

Paola1993 says:

No.. I just bought a phone because it was from A GOOGLE COMPANY. Couldn't care less about Motorola. I bought it because of Google and in a month it's sold, just like that.

Sent via Android Central App

polarimetric says:

Then you weren't paying attention. Moto execs have been crystal clear time and time again that Google had no direct influence on Motorola's phones. There was a time when I was skeptical about that, but this Lenovo deal makes me believe it. Everything you like about the Moto X was developed by Motorola anyway, so this sale should not affect your enjoyment of the device. Google just funded them.

TurboFool says:

Well, that was rather silly of you, then, wasn't it?

Buy a device first and foremost for what it is NOW. The future is never assured.

Ry says:

lol

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jdbii says:

So how many quarters are we talking about for Google to run up 2 billion in losses for running Motorola? Was it 7 quarters; 8 quarters? If they sold it for almost 3 billion now, and saved another 2 billion in projected operating losses over the next couple years, then it's a net of 5 billion (in a way). Okay, so maybe I can see why this is a strategic gain for Google, but I just wish they hadn't hyped up the Moto X so much. It gave the impression that Google had a long term investment in Motorola. I wonder if Moto X sales disappointed and that's why Google did this, or if it was the plan all along.

CmbtSwmr7 says:

Actually, I believe that Samsung and the other players had more to do with this then Motorola's disappointing sales. Speaking of I remember in the initial interviews, that Google said very clearly that they had several waves of product already in the pipeline that needed to be pushed out before they would get to work on a device.

To get back on point, I believe that the recent contract with Samsung and Google is what forced the sale of Motorola. None of the big hardware companies were happy about Google picking up Motorola and it finally came down to a choose which one would hurt less scenario. So Google scalped the pieces they wanted and sold the rest to Lenovo, who poses zero threat to Google.

TonyHoyle says:

It takes months to sell a company. It's not like they got on the phone last week to lenovo.. The timing is largely coincidence.

Posted via Android Central App

It seems like parallel processes to me, talks with Samsung and Lenovo. What's more, one deal had to be signed for the second to materialise.

BizzyGeek says:

Google should have given Motorola a couple of years to become profitable and then considered a spin-off instead of a sell-off. That way, Motorola would still be out there operating and impacting the Android ecosystem through competitive pressure in a way that Google intended, even after the divestiture. This is going to open the floodgates for more crapware and garbage UIs from the likes of Samsung and HTC. Even with Google's new rumored deal with Samsung, they don't have enough leverage in the negotiation to really push Samsung in the direction they want them to take their phones. This marks a downturn in the quality of Android options that will be available a year or so from now.

TurboFool says:

You're acting as though Motorola's being shut down, as opposed to being sold to a huge, extremely ambitious company hellbent on entering and gaining a massive presence in the US market. I don't know what to expect yet, but I have no reason to expect Lenovo to do anything but try to maintain Motorola's success while bringing in the principles that have succeeded so well for them in computers. Their laptops are exceptional.

I'm quite nervous about this, but your reaction doesn't actually match the reality of the situation.

zero.efx says:

Exactly... People are like "Oh noes my phones won't work anymore!"

Most people who bought the Moto X don't even know this happened today or care. It's not like Lenovo is going to sit there, pay all this money, just to smash Motorola in the face and beat it they're the mafia and Motorola owes them something.

Seriously people, if you paid 399 for a Moto X and if you're not willing to take it out of your pocket right now and smash it on the concrete. What makes you think that Lenovo would pay 2.9 billion and do the same thing?

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Grahaman27 says:

That was very well said.

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sk8trix says:

Im so sad if the nexus brand really goes away.......honestly I wanted to remain with nexus devices rather than super pricy google play editions.....google is really going to hurt alot of users who always counted on the afforbable hardware.

aniket96 says:

It's just a rumor without any evidence to support it. Now that Motorola is gone, it is highly unlikely that Google will shut down the Nexus program. They might make some changes to their business strategies but they won't shut it down completely.

Sent from my Nexus™ 4

TurboFool says:

Let's not forget the unknown value of the Advanced Technology and Products Group they held onto. Based on recent expenditures for robotics, AI, and thermostat companies, that could easily have been valued at over a billion dollars, in which case they're still ahead.

closers7 says:

Nice work, Andrew! You obviously put a lot of thought into this.

As for the blackberry thing? I highly doubt it at this point. Of course, if you asked me yesterday if I thought Google would soon be selling Moto, I'd have said you're nuts! So what do I know?

Posted via Android Central App

Thanks!

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DaFonZisBack says:

Let's face it moto sucked. Never did anything for the biz. All dey did was eat dust that they created off if people's palms.

posted with a galaxy note 3. h8ers gon' h8. live2win#swagface#switchedOn*_*

NoNexus says:

Wrong.

If nothing else, they started putting core apps in the play store and having them updated independently from the OS.

Whether it sticks or not is another thing...

deeb215 says:

I think Google started that with the Nexus 4 or Nexus 7 2013. Correct me if I'm wrong.

sicembaylor says:

I don't know what any of your incomprehensible gobblygook means.

drokssilva says:

@NoNexus
Much lol
Very gibberish

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Posted via my thumbs and Google Keyboard. N7 2013

brendilon says:

I can translate...

"I'm a moron and have no idea what I'm talking about, but it's the Internetz and I can say whatever I want LOLOLOLOL!!!"

TheMimic12 says:

Is this SamsungForLife? That guy Sounds like him.

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CmbtSwmr7 says:

Glad to know our public education system is still alive and well.

Joel E says:

Andrew, that was a very insightful analysis. Thank you. You say AC isnt an accounting firm..you could have fooled me. Well done..I actually. ...understand this. *run tells neighbors

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Zig261 says:

i'm worried Lenovo's going to turn Motorola into a business oriented phone division instead of for the masses just like they do with the ThinkPads.

ajpri says:

You do know this Eldar Murtazin guy doubted the original nexus one. He claimed apple made it up.

Posted via Android Central App on my Nexus 5 (4.4.2)

Mtn_Scott says:

PANIC!!!

Thank you, drive through.

Posted via Android Central App

erjennin says:

Surprised this site hasn't mentioned, what I consider to be, the real reason Google is selling Motorola.

Google is an ad company.... Android is a major source of user data collection for Google... Samsung is by far and away the biggest seller of android phones I.e. data source.... With Google owning Motorola, Samsung was recently pushing their app store, music hub, etc over Google's which was going to be a gateway into their own OS, eventually Tizen. Google is keeping the patents from Motorola and they just announced a patent sharing agreement with Samsung. This now makes Samsung a partner instead of another potential competitor.
From how I see it, Google was scared of Samsung leaving android as it's android partner for the potential loss of android users and another highly funded competitor on the OS front.

Posted via Android Central App

CmbtSwmr7 says:

+1 Absolutely.

Another user said something similar, but I agree with both of you. At the end of the day, Google cannot afford to compete with Samsung and instead had their hand forced to keep them happy.

Motorola got the short end of the stick.

ConTejas says:

Absolutely not.

Another part of the Press Release by Google mentioned that Lenovo is licensing the patents from Google. So I guess that adds to the cost saved or regained from the original deal.

Yup, but we're not sure what the structure of those licenses are. Could be a blanket license for 10+ years as part of the sale price, or it could be a paid per-device license.

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NoNexus says:

I love that the undertones of half of this is that it is Samsungs fault.

That is just paranoia at its best right there.

drokssilva says:

It is.

Google is scared that Samsung will abandon android.

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Posted via my thumbs and Google Keyboard. N7 2013

NoNexus says:

Tizen was not ready a year ago, it isn't ready now and Samsung would be pissing away BILLIONs to back another BILLION dollar venture (which is what it would take) that has no chance of success.

The mobile market has enough room for 3. Android, iOS and Windows (BB's 1.6% is a statistical who cares?).

No tizen is for the developing markets, not the US market.

JHBThree says:

Since when is Japan (which was supposed to be a launch market for Samsung's first Tizen device) a developing market?

CmbtSwmr7 says:

I guess it's also coincidence that Google signed a new patent sharing partnership with Samsung two days ago?

Samsung has been encroaching on Google's territory for the last year, especially since Google acquired Motorola. You can't really believed they traded Billions of dollars for patents only??

Motorola's sales?
Google admitted they would need to flush several cycles of devices out of the Moto pipeline before we would see Google's influence.

ConTejas says:

You way off the mark buddy. Yes, those patents are worth billions of dollars. Perhaps you haven't noticed the kind of money being spent on patent infringements...

Google and Samsung are solid partners. They just solidified that for another decade and it's REALLY GOOGLE SHOWING APPLE AND MICROSOFT IT WILLL STAND BY AND PROTECT ITS OEMS. How does that go over all of your heads?

JHBThree says:

Uh, not sure where you've been, but the droid ultra/maxx/mini and the Moto x were the first motorola devices developed under google.

brendilon says:

Whether or not Tizen would have been a success is open to debate. If Samsung skinned it like their Android Touchwiz and if it used Android Apps, would 90% of consumers notice? Or care? Probably not.
Even if it wouldn't have worked, it was still a point of leverage. Whether it would have worked or not we'll never know, but there is certainly a chance it could have worked.

JHBThree says:

There is no leverage in a new OS that carriers refuse to sell.

ConTejas says:

Wow...good post. Google is in no way, shape, or form scared of Samsung or certainly not Tizen. If there's any true to the pressure it would be from ALL the Android OEMs. Also, Samsung is not and hasn't been the least bit worried about Moto for years.

JHBThree says:

The problem with this analysis is that motorolas patents are worth nowhere near $5.5 billion. Every major case where Motorola has attempted to use its patents has resulted in major losses, even if it took an appeal from the other party to do it. Not to mention the fact that Motorolas behavior under Google prompted investigations by both the EU and US for FRAND antitrust abuse. IIRC, independent analysis of the patents motorola holds also yielded a value far, far below googles figures. (I believe they were only around a billion dollars)

With all of the taken into consideration, it is impossible to come to the conclusion that google did anything EXCEPT lose money on this deal. Because they did. The only reason they're selling motorola is because they took a gamble that the patents were worth taking on a money-losing hardware company, and they failed miserably.

That being said, I'm disappointed in this announcement. Motorola's new direction was refreshing, and I was excited to see what direction they were going to take with the successor to the Moto X and future handsets. With this sale, I don't know how much of motorola's new 'vision' will survive. I would also be supremely disappointed if Lenovo kills off motomaker, as that was a truly innovative idea and unique selling feature for Motorola.

NoNexus says:

It is not necessarily what you can use them for, but what they can protect you against.

JHBThree says:

Which is...nothing. Every major case that has involved Motorola patents has resulted in a loss for Motorola/Google.

CmbtSwmr7 says:

+1 Look into the Apple/Samsung patent suits as well. Didn't work out how either side intended it to go.

Pick any of them, doesn't matter who sued who first. Just another example of how fickle the IP law gods can be.

JHBThree says:

More like Google thought they could extract an exorbitant amount from licensees for Moto's SEPs, but didn't realize regulators would slap them back to reality. Google will get royalties, sure, but it will take them many years to recoup what they lost in the process.

somfw says:

You can skew, twist or calculate the numbers in whatever way they will make you happy, but the Bottom line is_Google Dumped Motorola because it failed.
They were losing boat loads of money every quarter and those number were expected to continue to worsen. Rather then stroke the egos of people like you, they bailed. And in doing so Lost about 8 billion. This idea that the Patents are worth 5/6 billion is absurd, they have next to no value, Motorola's patents were decades old and obsolete and even the newer ones were easily circumvented, this is the digital age not 1974.
Google has been on a constant losing streak in courts around the world and that litigation has raked up hundreds of million in legal costs alone. Not to mention they are going to allow Samsung and now Lenovo full access of all their technologies. Which in essence means the Patents are worthless.

Now for you people who are saying Samsung was mad and Google feared they would pull put of Android with this Ever present Tizen Rumor - B.S.
They pulled out because the New Droids were a total flop as was the Moto X and the G as well.
Google wants to "Uncarrier" America and sell phones at or near cost with no contract. But that number The Nexus 5 and the fire sale moto x set at $350 +/-, is way to high. You will never "Uncarrier" America when they can get phones for $199 - to as low as Free from the Carriers. It was a Failed attempt that began with the nexus 1 and has continued to this day.

bottom line? It's over, the fat lady has sung. Nexus is next And Google will lick its 8 Billion+ Dollar Wound and hope They can convince the carrier and the OEM's to turn Android into an "Appleish" OS With No Bloat or Skins.

Of Course if Apple Pulls a google and starts selling iToys in China at Moto G prices or subsidizes them for free right from the get go. It is going to get ugly real quick. Thankfully Apple Takes greed to a whole other level, but They and they alone are the last man standing with the resources to pull ot off.

I agree with you.

People claiming the patents, Samsung forking Android and all sorts of crap. Look, the patents are not worth the absurd 5.5 billion claim that Google said. Not worth anything close to that and that was proved when Google tried to sue Microsoft for 4 billion a year. The verdict? MS had to pay Google 1.8 million a year. Not billion, a measly 1.8 MILLION. So much for the oh so valuable patents.

Also remember that when that lawsuit against Microsoft failed for Google, then Google changed its tune and was all 'oh we'll only use our patents defensively'.....yeah right.

The patents are worth crap all, Motorola was bleeding hundreds of millions of dollars, the acquisition two years ago was just a bad, bad decision.

Now Google are trying to put it behind them. It was a failed purchase.

Anyone wonder why Lenovo didn't care to grab the 15,000 or whatever patents Motorola had? Because they're worthless. Doesn't matter if Google kept them, they're of no use to Lenovo.

meyerweb says:

Sorry, you don't understand the true value of the patents. It's not the royalties that Google will get paid. You're right, that's nothing. The real value is the lawsuits avoided, because Apple and Microsoft know if they sue Google, Google will turn around the sue back.

I just love how all the non-lawyers and non-experts in patent law are pronouncing their conclusions, which are based on zero knowledge of the subject.

brendilon says:

Bingo. If the patents were worth so little, Google would have included them in the sale.
Google has always said they would use patents defensively. The problem is, Microsoft was refusing to pay ANY licensing fees for patents that were clearly well established and which other companies were paying licensing fees for. In other words, Microsoft was stealing from Google/Motorola.

JHBThree says:

Google has tried that. It hasn't worked. Motorola's patents have been proven to be useless in court. Every case involving them has resulted in a loss. Google is losing billions in this deal, and I'm not sure why anyone is trying to argue otherwise.

SEGROUKIN says:

So does this explain why the Moto X and G had all that price slash down and discounts cos it's starting to make sense now.

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This message was brought to you by the numbers 0 and 1

JHBThree says:

No. That was likely to just drive sales. The Lenovo deal won't be completed for more than 6 months.

NoNexus says:

To drive the sale.

Inventory reduction and getting some ROI on Googles part

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This post approved by the NSA.... at least I hope so.

deeb215 says:

Yes you're correct, it was a fire sale.

JHBThree says:

No, it wasn't. Google will still own motorola through most of 2014, and will own the next generation of Motorola devices as well. (In a philosophical sense) I would wager it's to increase sales and clear inventory for the next gen devices.

Jello. Googlerola did the right thing. Pass the premium handset maker (motorola) off to the lesser(lenovo) and lenovo is set to go bat shir crazy right now. With the g, the color options and wood materials. Its on baby. Samsung . you are marked honey. They are coming to get you. This is a really solid move. Not to mention the Chromebook aspect. With built in Chromecast. Done deal baby.

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t0ked says:

While not super excited about the sale, If they were going to sell it, lenovo was the best option. I'm not afraid of what goes might do. Everyone thought the Thinkpad line would go to shit after they bought it from IBM. But the Thinkpad lineup today is as tough, reliable, and powerful as in the old days. So I think the phones will be just fine. We'll probably see an enterprise line and a more consumer lineup similar to their laptops.

I wonder what this means for Verizon's DROID lineup...

It would have been exciting to see what Google would have done if they retained Motorola.

CmbtSwmr7 says:

I too am wonder how Verizon will react to all this. The DROID marketing had really run its coarse though.

Verizon and Motorola have a long term deal do make moto the exclusive phone provider for the Droid line. Sure that contact could be broken on either side but I don't see it changing immediately.

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ralbers1701 says:

It would be great if the Nexus 5 had been a Motorola product.

I currently have a Motorola Atrix HD and the Atrix 4G prior to that.

My favorite feature of both these phones is the car dock. It would be fantastic to have this feature with a Nexus phone!

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rotkiv3451 says:

We finally had good smartphones with a fair price in Brazil with the Moto X and Moto G. The Moto X costs half the price of the iPhone 5S here, making it extremely desirable and because of that it's sales were extremely successful. I told my aunt to switch her old low end Galaxy phone to a Moto G and she couldn't be happier.

meyerweb says:

The lawsuits that Google won't need to defend as a result of holding these patents are worth billions, above and beyond any short term costs associate with these deals.

asaini007 says:

To be fair - is Lenovo acquiring Motorola's cash horde as well? It was 2.9 billion when Google bought them, but Motorola's operating loss would be cut out of there not out of Google's pocket. Did you guys consider this?

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patruns says:

Except that 2000+ patents are included in the sale. So how many did Google keep?

It's fair to say Google chose to keep any and all parents that are actually useful to the company.

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dwboston says:

The thing missing from this analysis is Motorola's tax-loss carryforwards. Forbes covered it last night in their piece about the sale to Lenovo. Moto couldn't use them because it had no profits. Google, however, was able to use these tax loss carryforwards to offset some profits for the past three years since it bought Moto. Motorola also had $3 billion in cash on its balance sheet at the time of the Google buyout. Forbes estimated that Google's net cost for the Moto purchase, after the Arris and Lenovo sales, was around $1.5 billion. Not bad for that entire patent portfolio, which Google retains and licenses to Arris, Samsung, Lenovo, and others.

sollared says:

You're not considering the time value of money at all in your cash flow analysis. You cannot straight compare $12B a few years ago to today.

brendilon says:

No they didn't. But they also aren't including the value of working up to their elbows running a hardware company or the potential stabilizing effect this has on keeping other OEMs from jumping to another OS (in particular Samsung).

JHBThree says:

Andrew is also not including the multibillion dollar losses motorola has cost google, or any of the costs for the turnaround.

Google is losing money here. Point blank, period.

bergeronjc says:

I understand this is a Google fan site and so you will try everything in your power to justify every action Google takes; but paying $12B two years ago and selling for only $3B means the purchase did not go as planned and is thus deemed a failure.

If Google had sold Motorola for close to $12B or more then it would be a successful business acquisition.

While Google still got a lot of valuable patents out of the deal selling a company for $9B lesson than what you bought it for is considered a failed acquisition. It happens to every company.

Google may seem to have the Midas Touch but even they can't make a fairytale out of everything.

Good for Google.
Not good for Motorola.
You heard it here first.

DonBrizzel says:

Just seems to me that Samsung muscled this entire deal, which kind of turns me off of Android at the moment. Samsung is trying to be the Apple of Android. No thanks.

Soon there will be three phone companies. Apple iPhones, Nokia Windows Phones, Samsung Android Phones.

MasterElwood says:

Google got 2 things out of the Motorola time:

1. The Moto G - probably one of the best selling Android phones by the end of 2015 (for "the next billion")

2. A new no. 2 in the Android space. That's important because now it is Samsung, then way behind LG - then the rest. Lenovo as new no. 2 WILL shake things up!

These 2 things are priceless for Google!

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raguram88 says:

Anyways, i love motorola products.