Stock Talk: Motorola was just a drop in the bucket for Google

Yesterday Google surprised us all with its announced plans to sell what’s left of Motorola to Lenovo for $2.9 billion. Since others have already done a great job of explaining how Google didn’t actually lose that much on the entire deal, I won’t rehash the math. Instead I’d like to focus on what I think of this whole situation.

When Google first bought Motorola, it seemed pretty clear that patents were a big part of the motivation. Given the threats posed by competing players (which are not gone), that rationale made sense. Because Google is holding onto most of the patent portfolio, we could easily argue that the primary reason for the transaction is still perfectly intact.

When it comes to hardware, I never quite understood what Google was thinking. It seems too much like they were trying to walk down the center of the road without having to pick sides. Google has many great manufacturing partners who are building quality Android hardware, and buying Motorola was viewed as a competitive threat.

Microsoft got started down a similar path with the Surface, but it at least fully committed to the path of being a hardware builder with the acquisition of Nokia, which was (and still is) by far the largest supporter of Windows Phone. If Google had bought Samsung Mobile, that would be comparable to what Microsoft did in terms of picking a side of the street to walk down. I don’t think it makes sense to be a weak competitor to your own partner base. And that’s exactly what Motorola seemed like under Google’s ownership.

Google as a handset manufacturer — competing against its own partners — never made sense.

I realize Google has a successful history with the Nexus brand. But I think that’s very different from owning a handset division. Google has traditionally relied on partners to design and build each Nexus product, and they were never really marketed too heavily compared to flagship phones from Samsung, for example. In my mind, Nexus represented a showpiece for what’s possible with stock Android and beautiful hardware design. The production volumes were never meant to be blockbuster, and I don’t think other Android manufacturers saw what Google was doing as overly competitive. 

So in short, I think Google is making the right call to sell to Lenovo. I don’t think it was their plan to do this from day one, but I admit I don’t really know what their plan was.  I’m guessing that they expected to make Motorola more of a success and failed to make it happen. Maybe Google decided to focus only on hardware where it can really differentiate itself, such as with Nest.

As a shareholder, I’m happy with Google’s decision. It was a relatively small mistake in the grand scheme of things.  Google’s market capitalization is $380 billion. This Motorola deal is a drop in the bucket.