Motorola was bought by Google three years ago for $12.5 billion, a sizable sum for a phone maker struggling to compete in the mobile industry at the time. Now, Google is ceding Motorola's physical assets to China-based Lenovo for just $2.9 billion.
It is not a one-time payment deal, however. The Chinese company is paying Google an initial $660 million in cash and a further $750 million in newly issued stock. As for the remaining $1.5 billion balance? Lenovo is promising to pay the remainder over the next three years.
It may appear to be nothing more than just your regular business acquisition, but there is actually more to it than just a company selling a business to another. One of the reasons Google bought Motorola in the first place was to have access to the phone maker's patents. It should be noted that Motorola is credited (patent-wise) with inventing the first mobile phone commercially available to consumers. Apart from that, Motorola has other patents that Google obviously wants to get hold of.
Google clearly has thought things through before finalizing its deal with Lenovo. Under the terms of the acquisition, the tech giant gets to keep most of the patents by Motorola. Lenovo still gets some of the existing patents, but only about 2,000 of them. Motorola has a license to use all patents kept by Google, and any patent cross-licensing deals made earlier between Google and Motorola will still hold.
As for Lenovo -- well, it gets the manufacturing part of Motorola, not to mention a brand that still is fairly popular in the United States and in Europe. The Chinese firm has always targeted these two markets but has not been able to fully penetrate them. With Motorola now in its arsenal, Lenovo may just have a legitimate shot at doing it.
Also, the move is not entirely without precedent. For many years, Lenovo had talked about acquiring a Western mobile brand. As a matter of fact, it did try with Blackberry, but ultimately fell through. Now with Motorola, the Chinese company finally got one.
And what a quality buy it is. Despite some struggles in years past, Motorola has bounced back and is now widely considered the third largest phone maker in the world. Motorola has clearly earned its place in the mobile industry.
That is why Lenovo is careful not to meddle too much going forward. Thus, the Chinese firm will not be uprooting Motorola from its Chicago headquarters, nor will it be letting go of Motorola's head honcho Rick Osterloh.
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