Lenovo + Motorola: What It Means

Written by Oonagh Reidy     30/01/2014 | 11:53 | Category: MOBILE

As the shock sale of Motorola to Lenovo is announced, what does it mean for the smartphone industry?

As announced today, Lenovo is to buy MOTOROLA for a cut price of $3 bn from Google. The $2.9 bn sale price is just a fraction of what Google paid for it in 2012.

The deal includes Motorola Mobility's portfolio of smartphones - Moto X and Moto G and DROID Ultra series.

Motorola is the No. 3 Android smartphone brand in its native U.S.

Google's sale of the brand it purchased for over $12 bn 18 months ago, shows it made a gamble on hardware, that didn't pay off.

But hey, at least it has Moto's massive patents portfolio, which it is holding on to. 

So what's in it for Lenovo, the world's biggest PC maker, (according to recent figures)?

The Chinese giant will gain a strong market presence in the US and Latin America with the Motorola brand, as well as a foothold in Europe, adding to its-growing smartphone business in emerging markets, it said in a statement.

Lenovo is the No. 4 smartphone brand globally, behind Samsung, Apple and Huawei, analysts IDC said this week.

"Lenovo, despite having no presence in North America nor Western Europe, finished the quarter in the number four position. The company's strength lies in its strong presence within key emerging markets and a well-segmented product portfolio spanning from simple, affordable smartphones to full-featured 5" screen models. Should [the company] become successful at branching into more developed markets in 2014, it could challenge Huawei for the number three spot," IDC said.

Adrian Ho, Ovum analyst, agrees the acquisition will boost Lenovo's marketshare in the US but warns of "challenges" including scaling and security concerns.

"This acquisitions does give Lenovo some traction in the enterprise market in North America but they will still face the same challenges of scaling and security concerns. The patents could prove to be valuable in the long run."

The deal "goes against the industry grain where most IT vendors are bulking up on their software and services capabilities, with deeper margins," he told CN.

Yang Yuanqing, CEO of Lenovo said:

"We will immediately have the opportunity to become a strong global player in the fast-growing mobile space.

"We are confident that we can bring together the best of both companies to deliver a strong, growing business."

Meanwhile, for Google, it can carry on what it does best - being at the top of its game, and making wads of cash in the process:

Google CEO Larry Page noted, "the dynamics and maturity of the wearable and home markets, are very different from that of the mobile industry."

Lenovo has the expertise to scale Motorola into a major player within the Android ecosystem. They have a lot of experience in hardware and global reach, he said.

The move will enable Google to "devote our energy to driving innovation across the Android ecosystem, for the benefit of smartphone users everywhere."

But he added: "this does not signal a larger shift for our other hardware efforts."

In the last two weeks alone, Google has snapped up two start-ups - home automation company, Nest, and just yesterday, it was revealed the tech powerhouse had bought UK - based Artificial Intelligence company DeepMind for circa $400m.

"We're excited by the opportunities to build amazing new products within these emerging ecosystems," Page said.

ComTech Analyst carolina milanesi @caro_milanesi 11m , tweeted:  

"Lenovo is not just getting Motorola brand & carrier relationships it gets people who understand Google's vision 4 Android - that counts too.

"Considering much of the exec team at Motorola comes from Google I very much doubt Lenovo will get rid of them."

As Peter Bright from ARS Technica pointed out on Twitter: 

"Motorola now free to make Windows Phones!"

And, he is dead right.