Washington,Jan.30,2014(WSJ): Google sells handset business to Lenovo for nearly $3 billion. Bryan Ma of IDC tells the WSJ’s Aaron Back how Motorola phones will give Lenovo a shortcut into the competitive U.S. Market.Google Inc. GOOG +2.67% ‘s experiment making Motorola phones has ended after just 22 months, with the company unloading the handset business to China’s Lenovo Group Inc. 0992.HK -8.21% for $2.91 billion but keeping a valuable trove of patents.
The deal unwinds the Internet company’s costly move into smartphone hardware after it acquired Motorola Mobility for $12.5 billion in May 2012. Google has struggled to compete in the cutthroat phone-hardware business—its share of the world-wide smartphone market fell to about 1% last year from 2.3% a year earlier, according to IDC.Google said it would retain the vast majority of Motorola’s patent portfolio, a key motivation of the original transaction that lets it defend those phone makers who use its Android software against patent suits. Google’s Android software powers the majority of the world’s smartphones.
The deal also signals the rising ambitions of Lenovo, which is seeking to be a bigger player in the global technology market. Lenovo, which last week agreed to buy a server business from International Business Machines Corp. IBM +0.09% , gains a brand that would catapult its place in the global smartphone market to third from fifth, far behind Samsung Electronics Co. 005930.SE -0.23% and Apple Inc., AAPL -0.60% according to IDC. Lenovo became the No. 1 personal-computer maker last year after buying IBM’s PC business in 2005.
The Google deal—and last week’s agreement with IBM—are likely to draw scrutiny from U.S. regulators concerned about security issues involving acquisitions by Chinese companies. An inquiry could delay the closure for several months or make it difficult to complete.
Despite Google’s attempts to run Motorola as an independent unit, executives at smartphone makers didn’t like relying for smartphone software on a company that competes with them in the hardware market.