Lenovo to buy Motorola division at Google for $2.91B

But Google will retain ownership of most of the Motorola Mobility patent portfolio

Lenovo Group is buying the Motorola handset division at Google for nearly $3 billion. Google confirmed the purchase in a statement released late this afternoon.

In that statement, Google said it would retain ownership "of the vast majority of the Motorola Mobility patent portfolio, including current patent applications and invention disclosures. As part of its ongoing relationship with Google, Lenovo will receive a license to this rich portfolio of patents and other intellectual property."

Lenovo will also receive more than 2,000 patent assets, in addition to the Motorola Mobility brand and trademark portfolio.

Lenovo, based in Beijing, has recently done well with sales of smartphones in China and other parts of Asia, but has long had interests in finding ways into the U.S. and other markets, according to analysts. Last week, Lenovo announced plans to buy IBM's X86 server business for $2.3 billion to help it expand beyond PCs, smartphones, tablets and smartphones.

Lenovo is already the world's largest PC vendor, thanks to its keeping PC costs low and recent gains in market share. But PCs are losing popularity as more people move to tablets and smartphones, which helped set the stage for Lenovo's purchase.

Yang Yuanqing, chairman and CEO of Lenovo, said in the statement that the purchase will allow Lenovo to expand its smartphone business rapidly.

"The acquisition of such an iconic brand, innovative product portfolio and incredibly talented global team will immediately make Lenovo a strong global competitor in smartphones," Yuanqing said. "We will immediately have the opportunity to become a strong global player in the fast-growing mobile space. We are confident that we can bring together the best of both companies to deliver products customers will love and a strong, growing business."

In a statement on its official blog, Motorola called Lenovo "the perfect partner."

"Lenovo has the expertise and track record to scale Motorola into a major player within the Android ecosystem," Motorola said in the blog post. "They have a lot of experience in hardware and they have global reach. In addition, Lenovo intends to keep Motorolas distinct brand identity -- just as they did when they acquired ThinkPad from IBM in 2005.

IDC this week said that Lenovo finished fifth in total smartphone shipments in all of 2013 and took fourth position behind Huawei in the fourth quarter. "Should the company become successful at branching into more developed markets in 2014, it could challenge Huawai for the No. 3 spot," IDC noted before the Google-Lenovo deal was made public.

Google looks to be a big loser in the deal, as it bought Motorola Mobility for $12.5 billion in 2011. The division lost $248 million in the last quarter.

Analysts interviewed before the pact was official said they expected it to happen. "Lenovo has been shopping around for a while and I think Moto makes sense, if with that comes a relationship with Google, " said Carolina Milanesi, an analyst at Kantar WorldPanel ComTech. "Lenovo needs smartphones to be successful, to be an all-around company and continue the push to the top."

As for Google, she said that Moto "was just not delivering and they would have lost much more money before seeing a change." Google benefits by getting a "strong second player" with Lenovo into the Google-Android ecosystem and Google will be able to get closer to Samsung -- the world's largest smartphone maker -- and Samsung's patents.

"Google got what they wanted from Moto," said Jack Gold, an analyst at J. Gold Associates. "They got patents, engineers and insight. Moto as a device manufacturer was never really strategic to Google. They don't need to be in the device business and it got them into some hot water with their leading manufacturers. This gets Google out of a business that they don't have a chance of making any real money in. I think this was the plan all along. "

Lenovo will benefit by gaining the Moto phone engineers for global sales, Gold added. "This is a win for Google and a win for Lenovo, in my opinion," he said. "I don't think Lenovo is done yet with acquiring markets and market share companies."

Matt Hamblen covers mobile and wireless, smartphones and other handhelds, and wireless networking for Computerworld. Follow Matt on Twitter at  @matthamblen or subscribe to Matt's RSS feed. His email address is mhamblen@computerworld.com.

See more by Matt Hamblen on Computerworld.com.

Copyright © 2014 IDG Communications, Inc.

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