Lenovo Buying Motorola From Google to Enter U.S. Smartphone Market

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Lenovo IdeaPhone K900Interested in buying a Motorola IdeaPhone? You might soon get the opportunity. Both Reuters and ChinaDaily are reporting that Lenovo is very close to closing a deal for the full acquisition of Motorola Mobility from Google. 

Google itself had acquired Motorola’s smartphone and cable box division less than two years ago, for around $12.5 billion. Since then, Motorola has largely operated at a loss for Google, despite efforts to stand out by breaking the U.S. carrier stranglehold on smart devices. Motorola has drastically cut the off-contract prices for its two main product lines, the Moto X and Moto G, and even made waves by bringing a large degree of the Moto X’s construction to U.S. shores.

Despite the recent backlash against Chinese business ownership in the United States, that last fact could resonate with Lenovo, who made similar news by promising to start building its famed ThinkPads here in North America.

Lenovo will reportedly use cash, stock, and deferred payments in order to buy the division – personnel at Lenovo had alluded to a large announcement coming at Mobile World Congress in February, but Brighthand had assumed it was a regular product announcement.

Despite the nearly $10 billion difference between what Google paid for Motorola and what Lenovo is planning, it’s likely that it wasn’t a complete disaster for the former. Google acquired more than just the smartphone manufacturing contracts and employees from Motorola, and it wouldn’t surprise us to see them keep some of the patents involved for themselves.

Lenovo and Motorola logos

The news comes hot on the heels of Lenovo’s acquiring IBM’s x86 server business, a move that imitates the same deal that made Lenovo huge in the first place (acquiring IBM’s consumer and business PC department). Like that deal, this deal for Motorola will be subject to approval by the U.S. Government – but that’s mostly a formality for a deal like this.

Lenovo has been making some extremely compelling smartphones in Asia – especially in China, where it ranks second in marketshare only to Korean rival Samsung. Unlike their PC and tablet offerings, however, the company hasn’t seen fit to release any of their smartphones in the U.S. – a move this acquisition will undoubtedly rectify.

We do wonder if this will change rumors that Google is considering dropping its Nexus program in favor of Google Play Edition devices; still, anything to make the U.S. smartphone market (currently ruled by Apple and, to a lesser extent, Samsung) more competitive is a win for consumers. 

*UPDATE*

Google made the news official just minutes after posting, confirming our suspicions about Google retaining many of Motorola’s patents. The official purchase price is just under $3 billion, with Lenovo paying $1.41 billion up front in a mix of Lenovo stock and cash.

From the release:

“The purchase price is approximately US$2.91 billion (subject to certain adjustments), including US$1.41 billion paid at close, comprised of US$660 million in cash and US$750 million in Lenovo ordinary shares (subject to a share cap/floor). The remaining US$1.5 billion will be paid in the form of a three-year promissory note.

Lenovo, which in 2005 acquired IBM’s PC business and its legendary PC brand, will now acquire world-renowned Motorola Mobility, including the MOTOROLA brand and Motorola Mobility’s portfolio of innovative smartphones like the Moto X and Moto G and the DROID™ Ultra series. In addition to current products, Lenovo will take ownership of the future Motorola Mobility product roadmap.

Google will maintain ownership of the vast majority of the Motorola Mobility patent portfolio, including current patent applications and invention disclosures. As part of its ongoing relationship with Google, Lenovo will receive a license to this rich portfolio of patents and other intellectual property. Additionally Lenovo will receive over 2,000 patent assets, as well as the Motorola Mobility brand and trademark portfolio.”

via: Google

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