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Motorola, Google’s Blind Spot

 

Was Motorola a big blunder for Google? Two years ago Google acquired Motorola for $12.5 billion, and has just announced an agreement to sell Motorola to Lenovo for $2.91 billion. The original acquisition of Motorola has proved to be a heavy financial loss for Google, but a steal on Lenovo’s part.

What was Google thinking? The company originally expressed interest in Motorola because they wanted the security of Motorola patents in order to stand up to Apple and Microsoft in court cases. In Microsoft v. Motorola, the original lawsuit was valued at $4 billion, but ultimately the case closed with Microsoft paying $1.7 million annually. At that rate it would take 3,235 years for the lawsuit to reach the original predicted valuation. Additionally, Motorola’s sales began to drop drastically over the two years.

What was Google’s mistake? Google is a very powerful software company that entered the hardware game just within the last 5 years, while Microsoft and Apply have been hardware giants for a few decades now. Simply put, Google does not have the expertise to defeat two hardware giants in a litigation battle or the expertise to provide Motorola with the hardware support it needs to thrive. Lenovo on the other hand has grown 90% over the past year in the smartphone market, and has many years of experience producing dependable hardware. As Google’s CEO puts it, “Lenovo has the expertise and track record to scale Motorola Mobility into a major player within the Android ecosystem.” Google’s original purchase was a misalignment of expertise which led to unforeseen risk.
Sources

http://www.theverge.com/2014/1/29/5358620/lenovo-reportedly-buying-motorola-mobility-from-google

http://www.theverge.com/2013/4/26/4271432/does-anyone-know-why-google-bought-motorola\

http://money.cnn.com/2014/01/29/technology/mobile/motorola-lenovo/

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3 Comments


John Murphy
02/07/14

I do not believe that Google lost big on the Motorola deal. Although they bought the company for 12.5 billion, they sold Motorola’s set top business for 2.35 billion. Also when Google made the purchase, Motorola also had 3.2 billion in cash when it was purchased by Google. That brings the cost down to about 7 Billion. When the 2.91 billion payed for Lenovo is added in this brings the cost of the purchase down to 4.09 billion dollars. Based on the fact that Motorola had operating losses during the time that Google had owned the company, Google will be able to use those losses when doing there taxes and will have to pay less because of that. The exact number for that are, however, unknown at this time. With the taxes included this brings Google’s cost well below the 4 Billion mark, and Google valued Motorola’s patents at over 5 billion dollars. These numbers may have been inflated by the company, because many analysts have valued the patents at about 4 billion dollars. To top it off, Google is keeping Motorola’s Advanced Technology and Projects Group, which has been behind the scenes making major developments for the future. So in all, I believe Google did quite well in the acquisition and sale of Motorola. They now have an even larger patent portfolio for there Android ecosystem that will enable them to protect them selves from patent sharking groups aiming to start up lawsuits against companies like Google.


Courtland Jeffrey
02/20/14

While I think a good argument is brought up, I also feel that many important aspects about Google’s purchase of Motorola were left out in this article. The Android ecosystem has been going through many changes in the last 2-3 years, as Motorola was practically the operating system’s king when it released the Droid phone. While Google purchased Motorola for their patents, they also needed to cause some ripples in rapidly decreasing the Android hardware industry. Samsung has recently stepped into a position of domination against other Android manufacturers and Google wanted to help level the playing field. They bought Motorola when everyone was jumping ship from company as the products did not compare to makers like Samsung, HTC, and LG. Google turned Motorola back in the right direction in terms of consumer interest.

While the company took a major loss, financially, from Motorola, there have been many positives as a result and now that it is ending up in the hands of a company other than one of few Android industry dominators, we as consumers can probably expect more, strong variety in purchasing options in the future.


Rizwan Assainar
03/23/14

The below personal comments talks in depth about the Google’s perspective and the details of it. But, I am not really sure of those aspects. However, as per the article above, I feel Google committed a very bad mistake by not using their expertise in the right place. Instead of spending so much on Motorola (Hardware), since their expertise is in software they should have been acquiring something of that sort. They were blind and did not have complete dominant information about the company while acquiring

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