Submitted by Google is selling Motorola Mobility to Lenovo, giving the Chinese smartphone manufacturer a major presence in the US market. Lenovo will buy Motorola for $2.91 billion in a mixture of cash and stock. Google will retain ownership of the vast majority of Motorola’s patents, while 2,000 patents and a license on the remaining patents will go to Lenovo. Lenovo will pay Google $660 million in cash, $750 million in stock, with the remaining $1.5 billion paid out over the next three years.
What.
…thought it was 1 April for a second.
Oh, FP, too.
They bought them for the patents – which they are retaining. The value of that patent portfolio is very hard to pin down accurately – it may take years before we can really say if the 7 Billion net they paid for them was a good buy or not. So far it doesn’t appear the patents have been all that helpful, but in the coming years anything can happen…
Besides, do you really think Google wants to compete with their OEMs? They obviously don’t intend to go vertically integrated, so competing with their OEMs is a lose-lose situation for them. They were going to figure out a way to get out eventually, they practically said as much when they bought them.
I think 3 billion, in light of the work Google has put into fixing MM might be a little on the low side, but that said I can’t think of a better buyer than Lenova – any of the more likely buyers (existing Android players) would have been buying MM to kill it. At least it is going to some new blood so to speak.
Where are Lenovo getting all this cash from? First IBM’s entire server division and then Motorola Mobility? That’d be a big ask for a company more than twice the size.
Lenovo and apple are the only 2 companies making money on PCs these days, and the thinkpad line is still hugely popular with businesses and education.
I believe it has to do something with reliability.
I doubt, as my old IBM ThinkPad T23 is much more reliable then my newer Lenovo ThinkPad E325 (and my relative’s E330 is fragile garbage firmware-wise at best). It might be regarded as global trend though – newer hardware is overall much less reliable.
It may be a model specific thing too. My wife’s Lenovo IdeaPad is going strong over three years in with no issues, and it was a budget machine.
I definitely agree though, that there has been a trend towards flimsiness with newer hardware. I have an old Dell CPx laptop that is rock-solid; only the hard drive has failed after nearly 14 years of continuous service (my boss used it for the first 11 years of its life, and gave it to me a few years ago to play around with). Even the original battery still holds a two hour charge.
In contrast, I had a Compaq laptop from 2006 that I had to repair constantly, and I babied it. I ended up replacing the original RAM when it went bad, the hard drive, the battery twice, and finally the motherboard itself. When it died again I gave up on it and parted out what I could salvage.
My millage varies. I’ve dealt with some thinkpads that did last forever, and some that died horrible deaths way too soon. I’m not convinced that lenovo has done a better or worse job.
It makes sense, the E-series are budget/low end machines, whereas the T-series tend to be (generally) higher quality.
I have used (work issued) T and W-series thinkpads and the quality, build quality mainly, remained pretty constant after the lenovo took over. If anything, certain things improved. Screen quality and trackpad used to be rather atrocious during IBM’s days. But I think that has more to do with plain tech advancements in the industry as a whole than any magic from Lenovo’s part.
I have problems with this statement, actually. I would expect low-end machines to be underpowered and to have lower quality materials; I still would expect the consistant reliability (except for model-specific features like T-series’ hardened casing).
“Reliability” is part of the “quality” equation. I’m not defending Lenovo’s pricing structure, in fact it was probably a mistake to include budget machines under the “Thinkpad” line as that will obviously dilute the brand if more people are having issues with those machines.
But people need to understand that “you get what you pay for” really is a truism for the ages (at least so long as capitalism is still ruling our lives).
I’m afraid we’re speaking about different types “quality”: in low-end hardware by reputable makers I expect lower quality in terms of cheaper materials for cases, less protected cases, worse materials elsewhere. I expect the same level of engineering efforts though, and I can’t see any reason why I should expect cheaper models underengineered.
P.S.: E325 was bought for being cheap and having trackpoint. I still think it is a bit better then I should have expected from its rediculous price tag.
Thinkpads haven’t been popular in education since at least the early 00’s when I started working in schools. It’s been dell, toshiba, hp and apple.
As soon as I see that pointing stick I shudder/laugh.
They’re still popular in Australia, with staff.
It’s what my Aunt was given (Teacher), as well as what all the staff at my college used (2007-2008).
At uni, it’s been all macs for the staff, but that’s the same everywhere, right?
What state? I live in Australia and have worked with about twenty schools and one state education department.
Total time I’ve used a thinkpad? When I worked for an ibm partner. Seriously.
… Tasmania.
We’re notorious for being behind the times, so maybe that’s why I’ve seen them here so much.
Touche.
Tasmania, I stand corrected.
Well they are buying on an installment plan so to speak, this is only costing them 600 million and some stock initially. They have about 3 billion in net cash reserves according to their Q1 financials. The IBM deal is going to cost them 2 billion in cash (plus some more stock), so I suspect they will be financing at least some of this, but technically they are not breaking their bank.
Being that IBM’s server division is estimated to generate 5 billion in annual revenue, and MM generates about 1.5 billion – its just a matter of them figuring out how to streamline those two operations to cut operating costs (neither of them has been operating at a profit recently).
Lenova is very good at cost cutting. I would wager they will turn both divisions around in a 2-3 years, probably MM first as it will be far easier as it is already on the right track and has more growth potential. All they have to do to get the server division on track is streamline and wait, as everyone else in the sector seems to be imploding all on their own…
IBM only sold its x86 server unit – not its Power Systems, Mainframe or PureSystem lines.
is not that much cash:
“Lenovo has agreed to pay Google $660 million in cash and $750 million in stock, with the remaining $1.5 billion to be paid out over the next three years.” (http://gigaom.com/2014/01/29/its-official-google-is-selling-motorol…)
Edited 2014-01-30 09:35 UTC
You should ask Google about it.
Microsoft will do the same with Nokia eventually.
And why would Microsoft sell off a massive hardware competency that matches precisely with their vertical goals?
Think of Nokia not just in the context of phones, but in the context of supply chain management, manufacturing footprint, and hardware expertise across the board. This could trickle down to tablets, wearables, and even Xbox.
Oh, and a nice side effect of this is that Motorola will be a licensee of Microsoft patents. The last major holdout has fallen. Lenovo already licenses from MSFT over Android infringements.
You are right as usual and I guess you’ll get a little percentage of those license payments. Man, it’s good to work on MSFT these days.
I don’t work at Microsoft. I don’t even own Microsoft stock.
Maybe, but if that happens it would go down as an admission of complete incompetence, a full-stop failure of what has become their central business strategy in mobile over the last 3 years.
Google bought MM for the patents. Maybe they got a bum deal, maybe they paid too much, etc. – but them selling off the rest of it is entirely logical and expected.
The MM deal may go down as a financial failure, but it wasn’t a strategic “bet the business” kind of thing that Microsoft buying Nokia was. Google can afford to lose 7 billion dollars, Microsoft cannot afford to fail in going vertically integrated in mobile – there is no turning back from it.
ps – I don’t actually think Microsoft will ever sell what was Nokia, I think doing so would be absurd. But if they did…
Edited 2014-01-30 00:16 UTC
Depending on how Google were able to structure Motorola’s loses tax wise under their tenure, the net cost of Motorola’s patents comes around $2 to $3 billion as far as Google is concerned (after the sale to Lenovo).
I honestly have no clue what the actual worth of that portfolio is. Thus it’s hard to gauge whether it’s a good proposition or not. My gut feeling is that it is still overpriced, as most patent portfolios tend to be. I assume Google’s management will spin it as having amortized back in 3 yrs over 3/4’s of their investment to get a patent nuclear option instead.
Edited 2014-01-30 04:08 UTC
I wouldn’t bet a few Dogecoins on that.
With WP8, Microsoft fixed it’s hardware problems (no more android retrofits). Now they’ve got the software side left to figure out (UI and app wise). Microsoft is a relentless juggernaut.
And thus ends the story about how Microsoft scared Google out of $12B. And this is a real loss, not a paper loss like a write down on future expectations (Surface).
Motorola’s patents have so far proven to be precisely worthless (they wanted billions, they got a little over ten million a year from MSFT in royalties). All it did was land Google in regulatory hot water.
Their mobile division is in even worse shape than Nokia, and Android as a whole has very little to show for this acquisition.
This has been a massive waste of time for Google.
As for Motorola in the context of Lenovo, I have pretty optimistic outlook. If someone HAD to buy Moto I’m glad it was Lenovo.
Fair enough, but what exactly would you have them do? Just sit back and let Microsoft and Apple leech their OEMs dry and pick them off and/or turn them one by one, destroying the bedrock of their entire mobile business?
The patent game is a racket. Its an arms race, and the only way to achieve peace is through strength… Maybe buying the MM patent portfolio didn’t give Google the leverage they were hoping for, but I ask again – what would you have them do? They had to try something in light of what was (and still is) happening…
So it didn’t work. What would have happened had they done nothing at all? Google might be 7 billion dollars richer, but they would have a bunch of OEMs who would feel like they were being left to the wolves and that Google was too weak to lift a finger to help.
At least this way those same OEMs feel they have something of a business partner in Google, willing to risk their own blood and treasure for the common good. Its a small thing, but I think it does matter in the grand scheme of things.
Trying and failing doesn’t make you weak and ineffectual – doing nothing does…
I think the problem is that hindsight wasn’t even required, it was evident prior to the purchase (and in fact commented on immediately after) that most of Motorola’s portfolio was either broadly licensed or standard essential with commitments to license indiscriminately.
While true that MM had cash on hand, revenue from patents, etc it is also true that they had and still have substantial liabilities. And as you point out, Google isn’t interested in being vertical, the MM acquisition never made sense and never was a good fit despite Google’s statements.
I think that a lot of this patent stuff is drummed up and made to be like a soap opera. The reality is that while money changes hands, a lot of the times its also a cross licensing agreements with various other incentives.
I don’t exactly think OEMs were as upset as Google was that their competitive edge which was cost was being eroded.
It has always struck me that Google is rather inexperienced when it comes to patent litigation and has made a lot of heavy handed moves. For example refusing to join the Nortel pool was endlessly foolish and they’ve opened themselves up to a world of hurt if that trial ever grows legs.
It very well might. My read of the situation might be off and perhaps Google did achieve some good in acquiring Motorola. I just think $12B could’ve gotten them a lot farther.
Imagine an outright purchase of Nokia and its patent arsenal (of which only 10% is even monetized).
That I’ll agree with. It is a consequence I think of the company essentially being run by engineers:
http://www.forbes.com/sites/timworstall/2013/07/10/an-excellent-exp…
from article:
They were too smart for their own good. The never contemplating that patents were for anything other than protecting one’s own inventions. By the time they realized it was purely a numbers game and they were losing a war they never knew they were participating in, it was too late to do anything but make ham-handed attempts at rectifying the situation…
They seem to have their legs under them now, as they are filling patents at a pretty brisk pace (and buying them as needed).
http://www.technologyreview.com/sites/default/files/images/google.p…
The point though is that patents are not about inventions or innovations, it is simply a matter of throwing enough money at the system so that you can acquire your own missiles to point back at potential litigation threats. They finally figured that out and sadly seem to have given up on attempts to buck the system. There may still be pockets of rebellion at Google, but for the most part the war is over and those standing on the moral high ground lost.
You have to play along to get along. Lesson learned.
Sad – I liked Google a lot more when they were naive…
Well, I for one would like to thank you for once again sharing with us Redmond’s official talking point on the matter.
I don’t think they’ve put out a presser yet gloating, though they should.
Well, you guys get on that…
I’d love to, but a prerequisite to doing so is probably working for them.
Oh yes, yes. Of course. *wink* *wink*
I can assure you that Nelson isn’t part of Microsoft’s elite OSNews Astroturfing Ninja Attack Squad. I don’t remember seeing him at any of the meetings & his name isn’t on the payroll records.
Lenovo has actually turned the Thinkpad into a turd. I work at IBM and after the acquisition of the consumer PC division – the think pads all started having drive crashes, failures, and batteries would die. This marks the death of Motorola. I have a Moto X and love it. Google could have really done something with it if they tried. Now it turns to cheap Chinese garbage.
Motorola Mobility is being passed around like a cheap whore. I guess we won’t be seeing any more great phones like Moto G or X any more. What is Google up to?
The Moto X and G were imo experiments in how you make a good midrange and budget Android phone and compete on something besides the specs…
Lenovo’s largest market by FAR is China, which has a growing and absolutely huge demand for good midrange and budget phones – the really high end stuff is priced out of most of the China market.
I think in Lenovo’s hands what you will see is exactly more of the lineage of the X and G – I think that is a big part of why they bought MM. It makes perfect sense to me.
Edited 2014-01-30 01:03 UTC
Wait what. Google only really cared about the patents after all?
That’s really not like them….
One thing I did notice on twitter is that a lot of Google defenders are assigning a value to IP. After decrying patents as worthless since forever.
Interesting change of heart.
There is a difference between worthless in a broad sense and having no financial value in a narrow sense. Kim Kardashian has a net worth of 40 million dollars. Paris Hilton has a net worth of 100 million dollars.
Both are worth lots of money financially and yet they are still completely worthless and offer no tangible benefit to society…
I want to make love to this comment. Brilliant.
Well, I wonder how US citizens could still feel proud.
I mean, a US company buy another US company to produce US based cellphones (Moto X) only to break it into pieces less than 2 years later. And, at last but not the least, sell it to a China company that already bought a flagship US business (IBM’s computers) a while back.
If that’s not a middle finger salute, I don’t know what it is.
I bet that the marketing genuises that invented such a machiavelous move are well paid and under protection.
Kochise
Edited 2014-01-30 07:38 UTC
Lenovo did not buy all of IBM’s computer business – only the consumer PC division and the x86 server. IBM maintains its Power PC, Mainframe, and PureSystem lines.
PowerPC… still being sold ? Apple ditched out PowerPC for a reason.
Do IBM still produce the Thinkpad serie ? Or its Lenovo that do ?
What are the figures comparing market shared of the remaining of IBM and Lenovo’s currentshare ?
Kochise
Only Unix/Linux servers, i.e. high dollar big iron. It is no longer PowerPC though, just Power Systems. Power7 is a very different beast than what Apple used to put in their machines…
http://en.wikipedia.org/wiki/POWER7
Lenovo
Its hard to gauge as I don’t know of a reliable source that measures only x86 servers as a distinct sector (which is their only overlap). IBM and Lenovo both have x86 server lines currently, although Lenovo’s products are mostly targeting the lower end of the market, and IBM is targeting the very high end.
IBM is number 1 globally in servers overall, but that includes mainframes, Power Systems, enterprise support services, etc. Lenovo is far behind by that reckoning – not even in the top 5. They are very big in China though (of course).
This sale will likely bump them up a few notches, but they have a ways to go to catch up with HP and Dell…
No, PowerPC processors still power 4 of the 10 fastest computers of the world: http://en.wikipedia.org/wiki/PowerPC_A2
Also your router, home server, washing machine etc. might use a ppc processor. Not as successful as ARM but maybe still more prevalent than X86.
I guess US citizens can still feel as proud as French or German citizens, which local mobile brands Alcatel and Siemens were sold to china years ago. If your proudness has anything to do with the national ownership of companies which is a strange concept to me anyway.
Note that Google didn’t lose so much, all told. From a comment on the announcement:
Moto total cost $12.5B to Goog in 2011:
– $3.2B Moto’s 2011 cash
– $2.4B Moto’s 2011 deferred tax assets
– $2.35B Moto’s Set-top-box business sold in 2012
– $75M Moto’s factories business sold in 2013 (incl 7K factory employees)
– $2.91B Moto’s Mobility business sold in 2014
Thus Moto’s remaining assets including patents, buildings (in Chicago and elsewhere), probably a good part of the 12K employees cost Goog $1.56B.
Doing that, Goog may have well protected and guided the Android ecosystem along in the past couple of years.
Good observation. Also going to add Motorola may have struck non publicized patent deals, and even prevented patent litigations from others which can’t be quantified but is impactful nonetheless.
Also going to add that Motorola had substantial liabilities which impacted their cash position. That and the cost of laying Moto employees off.
Edited 2014-01-30 11:13 UTC
Being a hardware vendor Google is open to another category of legal actions – they are defendless against patent trolls with no production, so that counter-action is impossible. Delegating hardware to third parties makes Google more secure, while Lenovo already carries all related risks.
I’m a bit concerned with future Motorola hardware quality – ThinkPad assets of IBM degraded under Lenovo administration, and Lenovo phones are not particularly good both in hardware and software, as far as I can tell from my personal experience.
Seriously Google? You spent hundreds of millions on Motorola, who own a great deal of mobile patents and some of the greatest engineers the business, and now you’re selling it again.
I guess Google is gonna keep the patents and engineers though.
I believe they want to gain cloud computing services market – smartphones are required from consumer perspective. They have their own solutions, but Motorola name is much better recognizable than Lenovo on this market. Not to mention – Motorola seems to be more trusted than unknown brand, especially on the US market as I believe, where Motorola have a special place (historically). Correct me, if I’m wrong. At least in my home country (Poland), Motorola is still recognized as a producer of state-of-the art telco/radio equipment. However, Motorola is not so popular on the smartphone’s market today. For me, this acquisition is more strategy-related, it’s an expensive marketing. At least currently – I can change my mind in future, I guess.
On the other hand they’ve acquired the whole x86 server business from IBM quite recently. This gives them an important part of data center market, too – virtualization is a friend of cloud computing, but it requires x86 hardware in vast majority of appliances. So? We will see more Lenovo-branded servers in our server rooms quite soon. This is business perspective.
Also, Lenovo bought ThinkPad brand from IBM in 2005. This is both – business and consumer perspective.
They are now well-shaped for future competition with huge players (HP, Dell). That’s, of course, my personal opinion, but I believe we will see more consolidation on the market in the following years. See Nokia’s and Microsoft case, as well as latest news about Microsoft support for Facebook’s OCP.
I can only ask: what about Windows Phone and Nokia’s future? What about future IBM’s profile? These are very interesting changes – worth additional investigations.
Best regards,
Pawel Wawrzyniak
http://turingsman.net/