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Thursday, January 30, 2014

Google To Sell Motorola For $2.91 Billion

A guard stands in front of a newly opened Motorolla handphone shop in downtown Hanoi, Nov. 13, 2006. (Hoang Dinh Nam/AFP/Getty Images)

A guard stands in front of a newly opened Motorolla handphone shop in downtown Hanoi, Nov. 13, 2006. (Hoang Dinh Nam/AFP/Getty Images)

Google has agreed to sell Motorola to the Chinese technology giant Lenovo. This comes just two years after Google paid $12.5 billion to buy the company.

Google was counting that getting into the mobile cellphone business would pay off, but that didn’t happen. However, this isn’t a total financial loss for Google. The company is keeping billion of dollars’ worth of Motorola patents.

Guest

Transcript

MEGHNA CHAKRABARTI, HOST:

From NPR and WBUR Boston, I'm Meghna Chakrabarti. This is HERE AND NOW.

And, in business news, Google has announced it's selling off Motorola Mobility to the Chinese company Lenovo for just under $3 billion. But this comes only two years after Google paid 12-and-a-half billion to acquire Motorola Mobility. So what's going on? Derek Thompson, business editor at The Atlantic, joins us now to discuss. Hi, there, Derek.

DEREK THOMPSON: Hi, there.

CHAKRABARTI: So, what happened?

THOMPSON: Right. You know, this is - one way to tell the story, I think, is just about the power of mobile. Google bought Motorola Mobility because it wanted to not only build the software for mobile phones with Android, it wanted to build the phones themselves. And so it tried, and it failed. Nobody wanted to buy Google's mobile phone. So Google said: Fine, we'll focus on the software - what we do well already - and someone else can do the hardware. But who?

And Lenovo comes around. They're the world's largest PC-maker. But PCs are, you know, so 1990s right now. It's a structurally declining business. So Lenovo actually has the same ambition that Google had. It wants to expand its core business into the manufacturing of mobile phones to compete with Samsung and Apple.

So, what we have here is the world's largest online advertising company just sold Motorola to the world's largest desktop computer company. Everybody wants to build a mobile phone. But right now, only Samsung and Apple are really making a lot of money doing it.

CHAKRABARTI: Yeah. So I'm going to - ask you about Samsung and Apple a little bit more in just a moment. But I see that, you know, basically, CEO - Google CEO Larry Page said what you said. He said it just didn't make any sense for Google to be in this business, and the move will enable Google to devote its energies to driving innovation across the Android ecosystem. But I do note, though, that in selling Motorola to Lenovo, Google kept Motorola's patent portfolio. That's important.

THOMPSON: It is important. And it's important because they can use it to protect against costly lawsuits. And I do think that, you know, the arithmetic here is somewhat interesting, because as you mentioned, Google bought Motorola for $12.5 billion, and they're selling it for $3 billion. And the math looks like they're losing, you know, almost $10 billion.

But, you know, in fact, they had - first of all, they had acquired about $4 billion in cash and tax credits when they got Motorola. They sold off various parts of it before this final sale to Lenovo. So I think it's more accurate to say that this has been a huge waste of energy, not necessarily a colossal waste of money, as it initially seems.

CHAKRABARTI: Right. So let's talk about what Lenovo stands to gain, because you mentioned Samsung and Apple. Samsung got, what, 29 percent, roughly 30 percent of the mobile market in the United States? Apple, 17 percent. And I'm seeing here that with this Motorola acquisition, Lenovo would have 6.4 percent, so a distant third. I mean, do they stand to have any sort of competitive muscle against Samsung and Apple?

THOMPSON: We don't know yet. You know, Moto X, which is the Google phone that they recently came out with, wasn't selling that well. So it's not entirely clear that Motorola still has the innovative juice you need to compete with these, you know, very popular Samsung and Apple phones.

I would say that, however, from Lenovo's perspective, you have the world's largest PC company in a mobile world. So they plan to do what Google tried to do, except actually, you know, make money doing it. I think it's a reasonable strategy for Lenovo. It's possibly the only way forward in a world where people aren't going to buy that many more desktops, but are going to buy more smartphones.

It seems like the right strategy for them, but it's not entirely clear, it's not destiny that this has to be a three-man race. Right now, Samsung and Apple are gobbling up a lot of the profits, the vast majority of the profits, even if they aren't building the majority of smartphones out there.

CHAKRABARTI: Well, Derek Thompson is business editor at The Atlantic. Derek, thanks always - as always for talking with us.

THOMPSON: Thank you.

CHAKRABARTI: And, listeners, let us know what you think about Lenovo's acquisition of Motorola. Is it going get you to buy a Motorola phone, or are you still wedded to that Samsung or iPhone? Let us know at hereandnow.org. You're listening to HERE AND NOW. Transcript provided by NPR, Copyright NPR.


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