Hello Moto: Lenovo grabs Motorola biz for $3bn. But Google's KEEPING the patents Lenovo has signed a deal to buy the loss-making Motorola Mobility smartphone manufacturer for $2.91bn, but a switched-on Google is keeping the patents owned by the firm it gobbled two years ago for $12.5bn. "The acquisition of such an iconic brand, innovative product portfolio and incredibly talented global team will …
It seems to have been a cunning plan by Google management to take over $9 billion outside and set fire to it! I guess they're doing their bit to reverse QE...
OK, OK. I know the patents must be worth something. But it ain't $9.5 billion...
I assumed they were after the patents, but wanted the hardware division as well, otherwise why didn't they sell it earlier? It seems bizarre to buy a company you don't want, with no idea how to get rid of it, when it's losing you over $1 billion a year.
I guess it's like a mate who's into motor racing. He bought a 60s Alfa Romeo, in decent race condition, because it had a racing sump that he wanted for his. His 'cunning' plan was to swap the sump with his, give the car a nice polish, and sell it on for a profit. Well the first two bits worked anyway... After a year of having it in a lock-up garage, and hiding the purchase from his wife, he finally managed to get rid for a classified amount less than he paid. At least it was his money to waste, not his shareholders'. Ooops! As the saying goes: Q. How do you make a small fortune in motor racing? A. Start with a large fortune.
I know the tax losses are huge as well, I was being a bit silly on the $9bn loss. Over $2 bn since they owned it, and I believe they're allowed to use the 5 years of losses up until then as well. So that's got to be close on $10 bn total to write off against profits.
So I guess that's $3bn odd corporation tax advantage and $4bn odd for sell-offs. Can they also claim a loss on the sale price? If not $2.5bn still seems a bit steep for those patents. It's a strange way to run a railroad...
except I believer the majority of Google cheerleaders were expecting exactly that to happen.
I've yet to see a Motorola smartphone in the UK. Maybe they are still a household name in the US but in the UK, they're only famous for the Razr.
You may have been living under the rocks for the last fifteen years. The US has been floundering due to a persistent infection of welfar-warfarism, which the doctor says is increasing and may well lead to arteries clogged by inflation a bit later.
Of course, all this China-vs-US talk is just so much mercantilist blather. This is companies we are talking about, at least nominally.
No, the US and much of the Western world is suffering by "financial and executive inflation". To inflate their earnings beyond what they could spend in two or three lives, they're trying to squeeze every cent they can from labor - and if it means to send everything manufactured or engineered to Far East they do, as long as they can pay themselves enormous bonuses at the end of each year - firing more people if needed - while trying to elude taxes using any hole in the rules they can find.
In turn, people who lose their job or find just less and less paid ones (and even engineers wages were kept lower using illegal secret agreements) ask for welfare subsidies to stay afloat - and politics will do because executives of companies paying for their campaign need people to stay quiet, and not start to ask for better salaries and more jobs - and avoid being asked to pay taxes like everybody else, because it would impact "shareholder value", and that's the real "First rule" dominating the US today.
Add that some executives in companies who need to sell weapons need some war here and there to extract more and more money from taxpayers (of course companies that pay little taxes don't care...) will support paranoid politicians who find enemies everywhere and keep on fueling the idea that US is in a "war against terrorism" and thereby everything should be allowed, including spying on everyone - but on Wall Street guys, it looks, or they would have known they were going to throw most of the economy in the dust bin because of pure greed.
>>"Remember that they never sued Google directly, only it's customers."
That's because Google came up with the genius idea of monetizing the _use_ of their product rather than the _selling_ of their product. So they are free to infringe on others' patents whilst others have to shoulder the costs of licencing those patents. All the while Google still makes money off infringed IP. And they still get to control Android itself by subverting the Open Source principles of it with all sorts of "soft" controls on it:
Good article on the last point for any interested:
"Is this really so hard for people to work out? Sure they bought Moto for the patents too..."
It was well beyond the understanding of some people here. Besides the usual run-of-the-mill cluelessness, there were even comments suggesting that Google bought Motorola for the sake of abolishing the US patent system. No, I don't know how that was supposed to work either.
"but that was only because of Apple and Microsoft's patent games."
It was Google who evidently thought that patents and patent infringement are some sort of "game". Why you would think that protecting one's IP is some sort of a game would probably make for a tedious and pointless discussion, though.
Google is a data collection company - not a development one. It just develops what helps its main business, often adopting and adapting something developed elsewhere (Linux, Java...).
Anyway Google tasted how difficult is to run an hardware biz today - stealing data from users is simple, designing, manufacturing and selling good hardware is much more difficult.
Indeed. People constantly overlook (including a certain Florian Mueller who spouts so much drivel it's unsurprising) that Motorola had $3billion in cash when it was bought. That, plus the $2.something billion they got for the set-top box division significantly reduces the headline "loss" they've made on selling. That said, Motorola did lose money after Google bought them, but much of that wouldn't have been cash and Google can use the loss elsewhere to lessen their taxes further.
Probably did end up overpaying for the patents still, but by nothing like what people are making out.
Interesting. If Motorola had $3bn cash, doesn't that make the patents free (or nearly so)? There's a lot of losses to set against tax. Possibly billions of corporation tax savings. $4-5 bn in selling the set top boxe and phone divisions. It doesn't take much tax write-off for those 3 to come to £9.5bn...
I knew I should have trained to be an accountant when I had the chance. There's gold in them thar hills!
"Under the terms of the deal Google keeps almost all of Motorola's intellectual property,"
Which makes $9.5bn for the patents which were already proven to be incapable of deterring Apple's and Microsoft's infringement lawsuits when Google bought them.
On the upside, however, the fact of Google's divestiture of Motorola might serve to allay any fears of other Android handset makers of having to compete with Android's owner. That can only be a positive.
However, there is every reason to wonder why either Lenovo/Motorola (Motonovo? Lenorola?) or Samsung would want to continue to use Andriod instead of cobbling together their own OS - Lenorola-Motonovo for the sake of not competing directly with Samsung in the low-margin Android space, and Samsung in order to capture more value by running their own app stores and ad networks - and either would, in that case, avoid the IP problems with which Android is encumbered.
Which IP problems are those?
The one's Samsung introduced on it's own with it's additions to the OS?
The ones presumably they would also add to any OS of their own?
Or the truly groundbreaking ones that are worthy of protection like how a list scrolls on the screen when you move it with your finger?
OOoooo or text entry auto correct when used on a touch screen instead of a physical keyboard!!
As I sit down at my desk once more to independently design some GUI elements, DP algorithms and UX behaviours, sure in the knowledge that I'll have violated 50 patents (totally worthless and obvious) and IP (utterly undeserving of protection) before my first dump.
>Which makes $9.5bn for the patents which were already proven to be incapable of deterring Apple's and Microsoft's infringement lawsuits when Google bought them.
It's impossible to determine what they deterred - like many you forget that all of Apple's early work with smartphones including the first Apple Smartphone (remember that?) were co-developments with Motorola - the actual details of IP arrangements never been made public
It's only $2.5Bn when you break it down in any case - that's about 20 days worth of Google Ads at the current level.
It's a pity in a number ways. There were signs that Motorola was turning itself around. Both the Moto X and the Moto G are excellent phones at very good prices. However it is not clear how being owned by Google contributed to that process.
Firstly how much did they gain in privileged access to the Android development map? Certainly the Moto G was ahead of the curve in terms of Android updates and the Moto X had its speech processor which seemed to point to the way Google wanted things to go. Unfortunately they will probably lose that advantage now. You can also question whether the very competitive price was down to Google's big pockets and the willingness to make a loss to increase market share
Secondly they made a big thing about being made in America. While that doesn't play much in the rest of the word, the states was a big market for Motorola where Apple is still dominant.
Saying that I am not one of those who thinks Lenova will be bad stewards and strip the present products out and replace them with Chinese clones. They have shown with the thinkpad purchase they are willing to maintain quality. Also it does open up the China market to Motorola.
But all in all I think Samsun and LG will be pretty happy with this deal
All the plonkers whining that if Nokia would have been far more successful if they had 'gone Android' look really clever now. Even bladdy Google cannot make any money from selling Android devices.
I really, really cannot wait for the 'Samsung fork' that kills Googles mobile spyware operation once and for all. Cannot come soon enough for me.
That strategy has done wonders for Nokia's shareholders. Who else would have bought their failing phone division off their hands? It had finally lost its competitive advantage on the low-end phones to China and Samsung, after years of very successful supply chain fancy-footwork. And at the same time management had seen the smartphone era coming for a decade, got all the research done to lead it, but then forgot to actually finish any of their 5 (or was it 10?) competing smartphone OSes. Had they gone Android, there's a good chance that the shareholders would have to fund the redundency payouts for everyone, and years of expensive restructuring. Rather than dumping it all on MS, and letting them take the risk.
Whats the suggestion? Nobody can make money from Android devices?
You mention Samsung in your post so I suppose you know they exist?
I remember the arguments at the time of the buy. The shrillest shrills came from those shouting how all those android phone makers would run away because it's obvious google would develop all the best bits for itself and keep them out of the loop.
Surprise, surprise, didn't happen.
Even before it would have occurred to me that they might buy Moto. The Lenovo brand is already trusted via their care of the Thinkpad franchise. No reason they can't turn around Motorola, assuming they make music with the telcos. Of course one might hope they would by-pass those 'stards -- who wreck products with their half-*ssed bloatware before we even get our hands on them.
My only worry is that Lenovo will protect their name's cachet by kicking off with premium prices, rather undermining my reason for welcoming our new Chinese overlords.
Seems a fairly shrewd move for Google. Get the patents, don't upset the OEMs too much absorb the losses against your tax and sell the bit you don't want to Lenovo to increase competition / shift more handsets. Google was never really interested in making handsets they just want people to run Android.
I'm guessing Samsung are none too happy as Lenovo are certainly more competition than Google (owning Motorola) would have been.
"I'm guessing Samsung are none too happy as Lenovo are certainly more competition than Google (owning Motorola) would have been."
I'm thinking Google were peeving Samsung (and other Android manufacturers) off by owning a competitor - the better Motorola does, the more Samsung is going to dislike Google - now Motorola's performance is out of the way.
"Both the Moto G and the Moto X are doing really well, and I’m very excited about the smartphone lineup for 2014." [^]
Don't you all just love when business people and PR mouthpieces use words like "excited" in the middle of announcing a write-off?
"Why, I'm so excited we could ditch this dead weight for a third of the price we paid for it, I can barely hold on to my pants!"
If one morning I woke up and realized I took a decision that flopped to the tune of $6 billion, I guess I'd be many things, but excited wouldn't be one of them.
Must be nice to be obscenely rich...
Consider the following:
Samsung working on Tizen - possible loss of Samsung Android business in long term.
BlackBerry go to Foxconn for manufacturing - reduce their device cost
Google rapidly do deal with Samsung which may mean they will abandon Tizen, and flog the phone arm to another Chinese manufacturer so they are not competing with Samsung, LG etc., while also being able to undercut both WP8 and BB on device costs at the low end of the market. If we think of the Moto G as a proof of concept that they hawked around potential buyers, it might make sense. Motorola might lose money on them, but only until the new buyer took over manufacturing and started to make a profit.
They have had several billion back from the Motorola deal by selling set top boxes, taking the cash in the bank, and obtaining tax credits. In the end I suspect they paid only $3-4 billion for the patents, net.
So to me it looks like this deal is nothing to do with technology and everything to do with adjusting to the realities of the global phone business. It suggests that Google's commercial arm is the driver.
Real shame, I've owned a few Moto smartphones and they're decent quality, but historically let down by their appalling approach to updates and the motoblur UI. It looked like Google were transforming them into plain GUI, current OS, affordable handsets.
I can't say I've ever looked twice at Lenovo gear...
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