The smart phone hardware game is shifting, and it looks as if Google won’t be playing much longer.
Google announced Thursday it is selling Motorola to Chinese computer company Lenovo for $3 billion. The move indicates that Google is shedding the hardware portion of its phone business, and Apple and Samsung could have another rival in the increasingly competitive quest for the global smart phone market.
Google bought Motorola in 2011 for $12.5 billion, its largest acquisition to date. This new move may surprise some, given Google’s acquisition spree as of late, but it appears the tech company is actually streamlining its operations.
Though Google will take a loss after this sale to Lenovo, with $56.5 billion to spend on whatever it wants, it actually seems this move will help Google focus on Android software (which powers more than 79 percent of the global smart phone market), instead of the increasingly competitive smart phone hardware market. By September 2013 (the end of Motorola's fiscal year), Motorola had lost more than $1 billion and revenue was down 34 percent.
That doesn’t mean Motorola isn’t valuable. As part of the acquisition, Lenovo will get 2,000 of Motorola’s patents (part of what attracted Google to the company in the first place), as well as the brand and any current and future products, such as the customizable Moto X smart phone. For Lenovo, this could launch it into the smart phone big leagues.
With this acquisition, Lenovo will become the third-largest smart phone supplier in the world, covering 6.4 percent of the market. Though this is still far behind Samsung and Apple (controlling 29 percent and 17 percent of the global market, respectively), it does bring Lenovo above the increasingly congested fray.
Also, 90 percent of Lenovo’s phone business is currently done in China, where it is the second biggest smart phone supplier, so a major US brand could help the company gain more traction in Western markets. Incidentally, Lenovo is more successful in China than Apple, who has made emerging markets such as China its focus in the past year. Currently, Lenovo does not sell smart phones in Western European or North American markets.
Lenovo is also the biggest PC maker in the world, after an acquisition spree starting in 2005, when it bought IBM’s PC business. It has continued to make moves in the PC space by acquiring IBM’s low-end server business earlier this year.
“This puts Lenovo in position to have leading offerings in smartphones, tablets and PCs — a vital trifecta that no other global manufacturer has — besides Apple,” says Frank E. Gillett, an analyst at Forrester Research, to the New York Times.