Google actually spent only $4 billion on Motorola, analysts say, and it's keeping the patents

Google actually spent only $4 billion on Motorola, analysts say, and it's keeping the patents
Buying something for $12.4 billion, then selling it in a year or two for $2.9 billion, like Google did with Motorola, doesn't seem like a sound investment at first blush. Drilling deeper into the deal, however, analysts are now claiming that when all is taken into account, Google ends up with $4 billion spent on the entire deal, and it gets to keep invaluable mobile-related patents, which the patriarch Motorola had amassed over the years.

When Google acquired Motorola, the troubled phone maker had $2.9 billion of cash in hand, and subsequently the Mountain View team also sold the Home division for $2.35 billion. When we add Lenovo's purchase price, and some $1 billion in tax-credits for Moto, Google ended up paying just a tad over $4 billion, gained some valuable insight on hardware-making, sniffed at it, and kept the patents. Given how the rest of the Silicon Valley giants tried to gang up on Google by acquiring Nortel's portfolio under the offshore name Rockstar Bidco for $4.5 billion, Google's patent-proofing might even seem like a bargain, even when we add the money that Motorola lost during its tenure with the search giant. 

The moral of the story is that Google didn't lose nearly as much as it seemed when it sold Motorola to Lenovo, plus it calmed Android makers' worries, especially Samsung's. Moreover, it freed up resources to focus on its new robots and automation quest, after having won the mobile market share battle by a large margin.

source: BenedictEvans (Twitter), NYT & Bloomberg

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21 Comments

1. superduper

Posts: 151; Member since: Oct 20, 2013

It also discovered that FRAND patents are difficult to monetize and litigate with, so its $12.4 billion patent heap is kinda worthless.

9. Finalflash

Posts: 4062; Member since: Jul 23, 2013

4 billion and no its not worth less because they just struck a deal with Samsung. Patent dinosaurs hell bent on litigating would never sign deals anyway. It's really their only hope so they have to fight dirty.

10. superduper

Posts: 151; Member since: Oct 20, 2013

Agreed. Motorola and Samesung have been playing dirty lately, although without much success.

2. Edmund

Posts: 656; Member since: Jul 13, 2012

accounting fail

3. ardent1

Posts: 2000; Member since: Apr 16, 2011

I really wish people / reporters do their homework. Moto has been a sinkhole for Google. See the nice chart in this article: http://www.businessinsider.com/motorola-is-just-burning-cash-for-google-2013-10

4. papss unregistered

So m$ didn't pay enough for Nokia but this is fine? Hmmm

5. ryq24

Posts: 872; Member since: Oct 17, 2011

Lenovo is buying the Motorola brand as the first step to enter the US market.

6. downphoenix

Posts: 3165; Member since: Jun 19, 2010

It is sad to see Google do this. They should have doubled down, not sold out. One of the reasons Android hasnt been able to completely take over is because of Google holding it back. Google was really cool and allowed android to grow fast, then it seems once they were comfortable enough in their position, they held back strongly. It is no wonder that Apple's been gaining on Google again later, when if Google would have done it properly, would have gotten them below a 20% marketshare.

13. g2a5b0e unregistered

You must be referring to the U.S. market. Worldwide, Android has an over 80% market share & iOS is under 15%. Not only that, Apple's share has been going down, not up. Obviously, those total numbers include the U.S. market as well. I guess I just invalidated your entire argument.

14. grahaman27

Posts: 364; Member since: Apr 05, 2013

apple is doing really well in the US.

15. g2a5b0e unregistered

I didn't say they weren't because they are. Still not as well as Android though. But, why would you look at just one country? One country that isn't even the largest smartphone market in the world. Makes no sense.

16. wolfsaviorzx unregistered

Apple is going down sooner or later. Microsoft doesn't care about Android in the long term. They have Apple in their sights with super premium Nokia Phones.

17. ardent1

Posts: 2000; Member since: Apr 16, 2011

Dude, you are looking AT THE WRONG NUMBERS. The correct numbers are market share of PROFITS. Therefore, you invalidated nothing.

18. ardent1

Posts: 2000; Member since: Apr 16, 2011

One more thing, to SHOW everyone why you are so wrong about the CORRECT METRIC, just look at Moto. Look at Moto's "market share" by units sold. Then look at Moto's "market share" by profits. And you wonder why a Chinese concern is buying Moto. Market share by units is CLEARLY the wrong metric.

19. g2a5b0e unregistered

Market share by units sold clearly indicates popularity. Therefore, for you to say that they are unimportant is asinine. I'm not saying profit share doesn't matter, but units are very important.

20. ardent1

Posts: 2000; Member since: Apr 16, 2011

g2a5b0e, you are so UNCTUOUS it's not even funny. The financial graveyard is filled full of companies that made popular products BUT are no longer around. Units mean nothings -- during the dot.com, many companies lost money on each unit and then these companies tries to recoup their losses by increasing volume. Now, that is asininity at its finest.

21. g2a5b0e unregistered

Get over yourself, dude. The company I care about makes more than enough money to sustain itself for quite a long time. That's all that matters to me. Your opinion doesn't.

7. remixfa

Posts: 14605; Member since: Dec 19, 2008

Im sad to see this. I really liked the direction Motorola was heading under Google leadership. Here's a question. What about the google guys that went to moto when they bought it? Are they going back to google, or are they being shipped off with Moto?

8. corporateJP

Posts: 2458; Member since: Nov 28, 2009

In the long-run, this is a moneymaker for Google. They lose a profitless division, they get to keep a ton of patents (many are not worthless, as others have said), and keep all their manufacturers happy and in their court. It sucks to see another American icon go the way of Pontiac, Oldsmobile, Mercury, etc. What can we do? Sit back, drink a Surge or Hi*C Ecto Cooler, maybe a Zima, and watch on your Zeineth TV...oh...wait...FML... Well, at least I feel a little better about Nokia now, at least it's pulling an Eddie Murphy and coming to America. Silver linings...

12. marbovo

Posts: 658; Member since: May 16, 2013

Well, this is how america taught us the way of capitalism

11. marbovo

Posts: 658; Member since: May 16, 2013

"When Google acquired Motorola, the troubled phone maker had $2.9 billion of cash in hand" Daniel P. you are assuming that google took all of that money from Moto and is selling it to Lenovo with $0 on Moto pockets??? I don´t think so...

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