When Google purchased Motorola, it was losing money hand over fist. Google saw potential in the brand and began the process of rebuilding the integrity of Motorola. First, it discontinued the Motorola ‘dumb’ line. The use of more intuitive software and less gimmicks has been a hit since the release of the Moto X.
Lenovo has been making big waves in the smartphone market, but to this point has kept its sights off of the United States. With this aquisition, you can bet that they will begin to shift their focus when it comes to their lines of smartphones. When you look at the purchase price you will see that Google is taking a giant bath on this deal. They are selling to Lenovo for $2.91 billion only 2 years after purchasing the company for $12.5 billion. That is a huge loss.
While Lenovo is purchasing the company, it’s more of a partnership. Google will still retain the vast majority of patents including “current patent applications and invention disclosures.” This will be an ongoing relationship with Google.
You can bet that all eyes will be on the next line of Motorolas that roll out with Lenovo driving the ship. Lenovo will use it’s current brand of smartphone in the markets where they are already doing very well and bring the Motorola brand to the United States. In markets like China, they may market both.
This deal will also free up Google from conflicts with other partners such as Samsung along with shedding a losing handset business. In the long run this will actually increase profit margins for the search giant.