Lenovo to Acquire Motorola Mobility for $3 Billion

The world’s No. 1 PC maker, Lenovo, which last week announced it’s buying IBM’s x86 server business for $2.3 billion, plans to acquire Motorola Mobility from Google, according to Google’s announcement Wednesday.

For Motorola Mobility employees, the announcement marks another round of uncertainty with a new owner. Just 20 months ago, Google closed its $12.5 billion acquisition with Motorola Mobility and initiated a string of deep cuts. Google inherited approximately 19,000 Motorola Mobility employees, but sacked 4,000 employees in 2012, the same year of the acquisition, and then another 1,200 last March.

It’s unclear how many of the 4,259 Motorola Mobility employees who remain, as of September, will be retained after Lenovo closes the acquisition. Google signed a 15-year lease for 600,000 square feet of office space in Chicago’s Merchandise Mart, and had planned to spend up to $300 million to move its headquarters from its suburban Libertyville location to its new downtown location. Apparently, that gave false hopes to the notion that Google was going to demonstrate a long-term commitment to its struggling smartphone acquisition, and not just gut it for its treasure trove of patents.

Reading Tea Leaves in the Deal

Under the $3 billion cash, stock and financing deal, Hong Kong-based Lenovo is acquiring Google’s Motorola Mobility devices business. That includes its related assets, intellectual property rights, and contracts, according to Google’s filing with the Securities and Exchange Commission. Google will retain the “vast majority” of Motorola Mobility’s patent portfolio, but will license the patents back to Lenovo for use with its Motorola devices.

Lenovo, which is facing a decline in PCs sales, is placing a multi-billion dollar bet on mobile with its Motorola acquisition. And it’s planning to have tablets and smartphones in the U.S. and western European markets by 2015, Yang Yuanqing, Lenovo chairman and CEO, has previously said, according to China Daily.

It also turns out that Lenovo, which acquired IBM’s PC business in 2005, now finds it needs to branch out. It’s dividing its two business units into four: PC, Mobile, Enterprise, and Ecosystem and Cloud Services.

With mobile being such a key part of Lenovo’s strategy, Motorola Mobility employees may be safe for now. They may find Lenovo treats them like its x86 server acquisition. Lenovo also has said it will offer jobs to 7,500 IBM employees as part of its acquisition of Big Blue’s x86 server business. That will nearly double its presence at its U.S. headquarters in North Carolina, which currently stands at 2,500 workers.

Lenovo to Follow Google?

Although the two companies have yet to get hitched, it wouldn’t be out the question that Motorola Mobility employees could later find themselves with yet another owner down the line.

Lenovo is only having to payout $660 million in cash, with the rest of the purchase price coming from giving Google a $750 million of its stock and a $1.5 billion in a promissory note that isn’t due until the third year anniversary of the deal closing. So, while Lenovo has skin in the game with its cash payment, it is by no means $3 billion worth of cash.

Additionally, Lenovo is going to face an uphill battle with its mobile move, given Apple and Samsung have a strong lead in the smartphone space. One other thing to consider is that if Google, as the birthmother of Android, couldn’t make Motorola Mobility a viable smartphone player, who can?

Some analysts have warned all along, though, that Google’s purchase of Motorola Mobility was a mistake. Will they say the same about Lenovo’s?

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