January 31, 2014
After purchasing Motorola Mobility 22 months ago for $12.5 billion, Google has decided to sell the handset business to China’s Lenovo Group for $2.91 billion. Although this is a loss for Google, the company did retain numerous Motorola patents. Google had been struggling to compete in the smartphone hardware business. The deal also signifies Lenovo’s attempt to break into the smartphone market, and create a bigger presence in the technology market worldwide.
“The Google deal is likely to draw scrutiny from U.S. regulators concerned about security issues involving acquisitions by Chinese companies,” reports The Wall Street Journal. “An inquiry could delay the closure or several months or make it difficult to complete.”
“Google originally paid $12.5 billion for all of Motorola, though it gained access to Motorola’s $3 billion in cash, and was able to sell Motorola’s set-top box business for another $2.35 billion,” notes the article. “Google had absorbed roughly $2 billion of operating losses through the third quarter of last year.”
The deal is expected to reduce potential friction between Google and hardware partners that use Google’s Android mobile operating system.
Lenovo is likely to use Motorola to make low-cost Android devices, which may cut into Apple’s market share, and possibly open up a new market of consumers who previously could not afford a smartphone.