Google is selling its Motorola unit to Lenovo, in what appears to be a tacit admission that its biggest acquisition ever was a major mistake.
Lenovo is paying $2.9 billion worth of cash, debt and stock for Google’s smartphone division. Google said in a regulatory filing that it will retain the “vast majority” of Motorola’s patents, but would license those to Lenovo.
The deal is contingent upon regulatory approval and certain closing conditions. However, it will not be subject to a shareholder vote at either company.
With the deal, Google is effectively taking a more than $5 billion loss on its Motorola investment.
Google bought Motorola in 2012 for $12.4 billion. If you factor in the $2.9 billion in cash Motorola had on hand at the time of the acquisition, Google paid a net of $9.5 billion. Last year, it sold off Motorola’s set-top business for $2.4 billion, primarily in cash.
On the other side of the ledger are the more than $1 billion in losses that Motorola has racked up since Google acquired and the restructuring costs Google incurred trying to turn around its operations.
Google’s Motorola acquisition has long looked dubious. At the time Google acquired it, Motorola was an also-ran in the smartphone market, a position which hasn’t improved since.
Many saw the acquisition as Google’s attempt to address its vulnerability to patent suits after it lost out on the bidding for the patents owned by Nortel to a group including Apple and Microsoft. But many have doubted the value of those patents and a series of court and regulatory rulings involving them have gone against Google. Meanwhile, the acquisition put Google in direct competition with its Android partners such as Samsung and HTC.