Google sells Motorola Mobility unit to Lenovo for $3bn
Google said that the smartphone market was incredibly competitive
Google has sold struggling US mobile phone company Motorola Mobility to Chinese computer maker Lenovo for $2.91bn (£1.8bn), in a surprise move.
Google had paid $12.5bn for the company less than two years ago.
Lenovo plans to build up its smartphone unit through the Motorola purchase, which may help offset its slowing personal computer business.
However, Google will keep the majority of Motorola's lucrative patents, which include one for Android software.
In a statement, Google said the smartphone market was "super competitive" and that Motorola would "be better served by Lenovo"
The purchase is set to make Lenovo the world's third-largest smartphone maker behind Samsung and Apple.
Market research firm Strategy Analytics said in a blog post that Lenovo had made "a good move" and would benefit from economies of scale.
"The Chinese vendor gets access to the valuable US smartphone market and the fast-growing Latin America region. This complements its existing global PC business.
"For Motorola, it gains access to an ambitious sugar daddy that has a strong presence in the huge China market. For Google, it divests a loss-making hardware division," it said.
Chinese deal-maker
This is the second major acquisition for Lenovo in the same number of weeks.
Last Thursday, the Thinkpad-maker announced it had acquired IBM's low-end server business for $2.3bn, in what was then China's biggest technology deal.
Shares of Lenovo being traded in Hong Kong fell by more than 8% following the announcement, which came after the US market had closed.
"Whether Lenovo can turn around the long-struggling Motorola business, and what happens to the Motorola brand long-term, remain key questions that will need to be answered in the coming months," Strategy Analytics said.
On a conference call following the deal's announcement, Lenovo chief financial officer Wong Waiming said they were not concerned that they may have overpaid for Motorola.
Analysis
Google always said the motivation behind buying Motorola's mobile phone business was its patents. This deal sees it keep most of them. That will help it fight future legal battles to protect its Android operating system.
The search giant had always kept the division at arm's length, in part to tackle any perception that it would give its own hardware an unfair advantage against other phone sellers. The outcome was that third-party made Google Nexus-branded phones often stole the limelight.
Even when Google did invest in a reported $500m marketing blitz to promote Motorola's flagship - the Moto X - in the US, the brand only made slight gains in market share.
A sale to Lenovo means Google can stop worrying about Motorola clocking up further losses. It will now be interesting to see if owning the brand can help Lenovo to do what other Chinese smart device makers have struggled at: cracking western markets.
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