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Decoding the Lenovo Motorola Deal

 

Last August 15, 2011, Google acquired Motorola Mobility Holdings, Inc. for $40.00 per share in cash, or a total of about $12.5 billion. In less than three years, Google agreed to let go of Motorola to Lenovo for US$2.91 billion, about $9.5bn less than what Google paid for Motorola. A bargain if you ask me.

Google acquired Motorola to supercharge the Android ecosystem and will enhance competition in mobile computing, but it didn’t turn out according to plan. Lenovo will now acquire Motorola Mobility to strenghten their position in the fast-growing and competitive mobile space.

With the deal, Lenovo now owns 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.

In a January 2014 report released by IDC, Lenovo, despite having no presence in North America nor Western Europe, finished the 2013 quarter in the number four position, even surpassing LG who landed fifth. With the Motorola acquisition, Lenovo will now be in third place in the global smartphone market share.

So let’s take a look at the possibilities and as to why Lenovo bought Motorola and as to why Google let go of Motorola:

In my humble opinion, Lenovo bought Motorola not for the market share, not even for entering the US market – its about stepping outside of China and to compete with the likes of Apple and Samsung. Lenovo has something that Apple and Samsung don’t have right now and that is a strong China market penetration. With the acquisition of Motorola, Lenovo now has what Apple and Samsung has – a known and strong worldwide brand.

Acquiring Motorola, Lenovo also sends a very strong message to their competitors and customers – that they are a stable company, a serious contender and a serious player. Lenovo now has a complete global product lines in PCs, smartphones and tablets. Lenovo CEO Yang Yuanqing says it all “We will be going from an emerging-market player to a worldwide player in smartphones”.

Now why did Google agreed to sell Motorola? Simple it’s not working for them. Google bought Motorola for one reason – to take control of Motorola’s patents, not so much on the hardware side. Besides, pushing the Motorola handset will simply confuse other phone manufacturers using Google’s Android OS. Is Google our friend or is Google our enemy? This is the exact problem Nokia had before with the Symbian OS and its own handsets.  Now, Google can concentrate more on developing their Android OS.

With the new partnership, Google and Motorola now has a bigger chance to penetrate the huge China market where Lenovo already has a strong hold. This is going to be an exciting Android world war.

And last but not the least, as I always say – the more options and more competitions, the better for the consumers. More options, more choices, more affordable and better quality products will become available.

 

Article written by:  Jerry Liao

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