Google selling Motorola makes sense because it gives Google more power over Android (and Samsung)

This article may contain personal views and opinion from the author.
Google selling Motorola makes sense because it gives Google more power over Android (and Samsung)
Today's news that Google was selling its Motorola devices division to Lenovo for $2.91 billion was shocking, but it probably shouldn't have been much of a surprise. Maybe I'm not the normal user, but I am a huge fan of the Moto X and what Motorola has been doing, and I've already run through the five stages of grief in the past few hours since the deal was announced.

When the rumor first came out, I thought it couldn't be real, but given that it was reported by Reuters, it was hard to deny. I got a bit angry, because I had literally just bought my Moto X last month, and I considered the bargaining aspect of maybe selling my Moto X in protest. I was sad about the prospects of Motorola's amazing products, but soon accepted the news as more details came out. 

Larry Page has said that "Lenovo intends to keep Motorola‚Äôs distinct brand identity", which right now means a focus on near-stock Android software and the Moto Maker customizations. And, to ease the other concerns that lingered, the news came out that Google is not selling the Motorola Advanced Technology Projects group, meaning that Project Ara and other "moonshot" ideas like security tattoos and biotech sensors are staying with Google. 

Rationally, it makes sense

All that leaves is the rational thinking and conspiracy theories that will inevitably surround this deal. Starting with the rational side of it: this move was likely inevitable. From the moment Google purchased Motorola for $12.5 billion, the prevailing idea was that the deal was mostly about the patents, and we always assumed that Google would likely offload the hardware divisions because Google is at heart a software company, not a hardware company. That assumption was validated early on when Google sold the set-top box division of Motorola to Arris for $2.35 billion. Google likely boosted the value of the Motorola smartphone division from where it was when Google first purchased the group; and if you combine the set-top box sale with this one, that adds up to $5.26 billion plus whatever licensing fees are coming from the Motorola patents. That brings the cost of the Motorola patent portfolio down to under $7.24 billion, which isn't so bad for 24,000+ patents to help protect the Android ecosystem.

The surprise came then because Motorola didn't unload the smartphone division, and actually let it run in a very Googley way. Google was running Motorola as a separate entity, but it was obvious that Motorola was making its product decisions with influence from Google. The Motorola custom software disappeared in favor of near-stock Android with only a few choice improvements, which were added as apps that could be updated through Google Play, meaning much faster system updates. Motorola adopted AMOLED displays in a way that Google had always hoped manufacturers would. And, Motorola offered choice, not just by breaking Motorola's long-standing partnership with Verizon and bringing the Moto X to other U.S. carriers, and the Moto G internationally, but through the Moto Maker and the deeper customization available there. 

Of course, through all of this, Motorola has consistently lost money for Google, and estimates say that in total since Google acquired Motorola in 2011, the division has lost close to $2 billion for Google. Google is expected to announce its Q4 earnings tomorrow, so we'll see if Motorola has been able to slow the bleeding at all since it ramped up the Moto Maker offerings and began the rollout of the Moto G, but even if it has it would only point towards reasons why Lenovo is buying and not to value that Google is getting. 

Even so, the profit margins for most smartphone makers is pretty low, somewhere around 2-3%. The only manufacturers that can command more than that on a consistent basis are Samsung and Apple. Given the recent price drops of the Moto X, and the low margins on the Moto G, Motorola had very little chance of generating profits. It was assumed that maybe, like other Google properties, profits didn't matter so much as the changes that Motorola could instigate in the market. But, conquering the emerging markets was inevitable, the quality of the Moto G likely just sped up the improvements in low-end hardware that were coming anyway. The other big change Motorola was poised to make was with the modular phone idea of Project Ara, but Google is keeping hold of that with this deal anyway. 

Larry Page said in his blog post on the deal that the reason Google was selling Motorola was because the only way to be successful in the smartphone market was to be "all-in". That was something Google couldn't do, and it seemed like the road was a long one for Motorola to make it to the "all-in" status as well. Motorola had started by focusing solely on the U.S., and it had just recently begun expanding into Europe and South America. But, if you combine Motorola with Lenovo, which has seen success in Asia, that is a formidable combination, especially if Lenovo really does let Motorola continue as it has been going. It is always possible that Google wants Motorola to succeed, and sees this as the best option for that. 

Google made us all feel like it was really going to continue supporting Motorola, but in reality the honeymoon couldn't last, because the company was being run in a bit too Googley a way. The Moto X didn't gather much customer support, so the other Android hardware makers didn't get too worried, but then the Moto G came out, and that likely ruffled some feathers, not the least of which were the feathers of Samsung, because emerging markets is the big growth market of the future for smartphone makers. 

The Samsung conspiracy

Google and Samsung have had something of a tense relationship recently, because Samsung controls a huge amount of the Android ecosystem, but has also been edging away from Google with its own content stores on its Galaxy devices as well as its own mobile OS in the works with Tizen. Last week, the big news came down that Google and Samsung had agreed on a global cross-licensing patent deal; and today, we learned that the talks between Google have continued and widened. It has been rumored that Samsung has agreed to possibly kill off its Android-hiding Magazine UX that it had planned for its new line of tablets, and also to promote Google Play content rather than its own stores. 

When the report of that came out, we were careful to mention that there has been no report of what Google's side of the agreement might be in this deal with Samsung. There is almost no way that Samsung would agree to do something as drastic as promoting Google Play over its own stores if it weren't getting something in return. It's possible that Google agreed to waive the Google Play Store licensing fees, or maybe it took a lesser part of the patent deal in order to get Samsung to cooperate on this. Google might have agreed to give Samsung the reigns on the Nexus devices coming up.

But, what if this is Google's payment for Samsung agreeing to tone down its Android software? Maybe Samsung asked for one thing: for Google to be completely out of the smartphone hardware business. Obviously, it's unlikely that Google could have pulled off the deal with Lenovo all that quickly. Maybe Google has been in preliminary talks with companies about selling Motorola from before, but wasn't very serious about making a deal. Samsung likely would have known that the possibility was there, and maybe Samsung pushed a bit once the talks with Google began early this year. Both sides get what they want: Google gets a more Android-friendly Samsung, and Samsung gets Google out of the smartphone business. 


I used a lot of maybes in that last passage, because there's no way to know right now if any of that speculation is accurate. But, the reports about the new deal between Samsung and Google have said that there was a "sea change" in the relationship between the two sides, and that there will be more details coming because there are more deals in the works. Samsung and Google are likely still talking through this new partnership and what each side can offer the other. Whatever paths the talks are taking, Google is in a far better bargaining position to get what it wants, and what the Android ecosystem needs, if Google isn't a direct competitor with Samsung. That means selling Motorola would a necessary move for Google. 

The idea extends beyond Samsung as well. Google likely found it more difficult in negotiating any deals with hardware partners while it had Motorola in its stable. Sure, having Motorola would give Google a way to strongarm partners, but Google has always been a company to lead with a carrot rather than a stick. And, there are enough new mobile platforms springing up, including Samsung's own Tizen, that hardware partners could threaten to abandon Android just as much as Google could possibly threaten to take over the hardware of Android itself. 

Google is not Microsoft, and Android is not Windows Phone. Windows Phone has had its success almost entirely through the work of Nokia. Android has been successful because of the myriad hardware makers pushing devices worldwide, which is something Google could never do on its own. So, any potential threat of Google using Motorola would easily be outweighed by losing other hardware partners, meaning that in the end, Motorola had to go, no matter how much we (I) may have come to love the Google Motorola. 



1. jphillips63

Posts: 253; Member since: Jan 04, 2012

Sounds like here it's a power play in who has the biggest set of balls.

16. nokia12

Posts: 610; Member since: Nov 19, 2013

great article Michael.. this is how a partnership should be , equal and mutual benefits for both.. unlike Microsoft Nokia ..where 1 just rips off the other until its worthless and then grabs it for pennies..

37. blazee

Posts: 414; Member since: Jan 02, 2012

This is seriously disappointing. i have the moto x and i love it its a great device, but now without google behind it i feel like it wont be getting the same support. I recently just got it and i think im gonna now return it

2. BattleBrat

Posts: 1476; Member since: Oct 26, 2011

Now I must turn to Sony, but they don't have anything for Verizon Goodbye MOTO :-(

4. E.S.1

Posts: 308; Member since: Sep 14, 2013

You should consider LG G2. It's an awesome phone. I used GS4 and HTC One but LG is so much better you will like it.

8. __0__

Posts: 242; Member since: Jan 07, 2014

The software is like touchwiz , bloaty and heavy on LG . I seriously dislike skins like LG UI and s**twiz . Battlebrat should change to GSM carriers so he could bring in whatever he wants

11. BattleBrat

Posts: 1476; Member since: Oct 26, 2011

I have a note 3 on t mo as well, I can confirm that the UI is horribly bloated, the RAZR is nearly as fast and its two years older

15. domfonusr

Posts: 1085; Member since: Jan 17, 2014

If my LG Viper can run LG's UI half-decently, then the G2 should be downright smooth and buttery. Even if it isn't, don't worry... its Android, so you have options.

20. EarnYourLeather

Posts: 87; Member since: Feb 14, 2012

It is. There is virtually no lag.

25. DigitalJedi_X2

Posts: 346; Member since: Jan 30, 2012

The G2 is insanely smooth. I haven't encountered any lag at all yet.

31. PBXtech

Posts: 1032; Member since: Oct 21, 2013

On the G2 it runs insanely smooth. I find a lot of the features are extremely helpful as well. Coming from being a die hard Nexus fan, the G2 surprises me all the time.

3. darkkjedii

Posts: 31055; Member since: Feb 05, 2011

Wow, sounds like trouble in paradise. I can't blame Samsung for pushing ahead with Tizen, but android propelled them into the lime light, from simple feature phones. If they do leave android, which means they'll become a huge and direct competitor, that won't be good google...stay tuned.

7. joey_sfb

Posts: 6794; Member since: Mar 29, 2012

Well let just say they realize they need each other to continue to prosper. Damn I do like the magazine ux interface. Can google work with flipboard to bring it to lollipop?

5. domfonusr

Posts: 1085; Member since: Jan 17, 2014

I'm not entirely convinced. I read elsewhere that, of the 17,000 Motorola patents in Google's possession, they are willingly parting with 10,000 of them. That is a big chunk that they are losing by letting Moto go. Why are they giving up so many? Are those 10,000 not considered valuable? I wish I knew the answers to these questions. I'll be looking around for answers.

23. nokia12

Posts: 610; Member since: Nov 19, 2013

as per verge only 2000 patents will be transfered while rest will be licenced... these 2000 patents must be old hardware related.. that's why google not keeping them..

29. domfonusr

Posts: 1085; Member since: Jan 17, 2014

Okay, I found the Verge article you cite: I have also read elsewhere, and it is worth noting, that the Moto patent portfolio failed to get the money they demanded form Microsoft back in 2010, and failed to elicit an ITC decision that would have blocked imports of the iPhone more recently. Perhaps they are letting go of that clump of them because they were proven to be valueless in the mobile patent wars.

28. elitewolverine

Posts: 5192; Member since: Oct 28, 2013

My though would be that they bought Moto to do patent protection, they have since found that their portfolio is outdated and doesn't protect them much against the likes of Apple or other companies. They are spending more than they are worth in defending them. With samsungs patents Google can now chew more of those up in terms of usage without penalty. What we may see is a google Samsung ui next year, that google will use as the new 'stock' interface and probably introduce it as lime 5.0 or whatever.

30. domfonusr

Posts: 1085; Member since: Jan 17, 2014

Here's the problem with Samsung's patents: they get invalidated and beaten in many instances. I don't trust Samsung's patents to protect Google any more than they protect Samsung. I really really hope that Google doesn't use any of Samsung's UI's for stock Android... that could prove to be disastrous.

40. Taters

Posts: 6474; Member since: Jan 28, 2013

They might get invalidated in the states but that's more because of stupid jurors and Apple being the United States super power more than the patents themselves. They got ITC to ban iPhones but Obama stepped in. I wouldn't say they are bad at all.

54. domfonusr

Posts: 1085; Member since: Jan 17, 2014

Yeah, but what good are patents if that keeps on happening over and over again? If the cronyism reigns supreme, and patents are invalidated on the whim of some power player who has already personally picked a winner, regardless of patents, then what good are those patents? Apple is clearly the 'chosen one' for the higher ups in a lot of these cases. Apple has become so strong of a poster child for US commerce that the President personally overturns ITC rulings to defend them. No patent can beat that. They're unbeatable because they have the favor of the right people.

6. ProblemSolver15

Posts: 372; Member since: Jun 14, 2010

Definitely a shake-up in the world of consumer electronics. This can either be very bad or very good for consumers because removing Motorola from the playing board can certainly mean no more Motorola devices on Verizon here in the States. I mean, who knows what Lenovo will do with the device department for Motorola. Guess we'll just have to see. I'm interested to see how how his will play out. They were a major manufacturer here in the US.

9. __0__

Posts: 242; Member since: Jan 07, 2014

Damn , even I am a note 3 user serisouly dislike samsung now . They so evil

10. pongkie

Posts: 663; Member since: Aug 20, 2011

I feel sorry for Lenovo all they got from this deal is a brand

13. domfonusr

Posts: 1085; Member since: Jan 17, 2014

... and 10,000 mobile telecom patents.

24. DigitalJedi_X2

Posts: 346; Member since: Jan 30, 2012

Google isn't losing 10,000 patents. Google already stated that they will keep the vast majority of Motos patents.

32. domfonusr

Posts: 1085; Member since: Jan 17, 2014

Yep, just read that at the Verge thanks to nokia12. 2,000 patents. That's still a decent chunk.

33. elitewolverine

Posts: 5192; Member since: Oct 28, 2013

licensed not keep, meaning when that runs out google does not own the patents, Lenovo will. This is to ensure Lenovo doesn't get crazy and allows google time to use the patents with free of fear. And also some leverage. In the end though license and owning are two different things. Unless I misread the article, in that way, my bad.

34. domfonusr

Posts: 1085; Member since: Jan 17, 2014

Well, first I read: where the 10,000 figure was cited from China Daily. Then I read the article from the Verge (cited above in comment #29), where they say that 2,000 patents are being sold (transferred) while the rest are being licensed out to Lenovo (without any reference to them being transferred upon the end of the licensing term). I read that as Google keeping 15,000 of their Motorola-sourced patents, which they will license to Lenovo until the end of term, or until further notice for all I know. Otherwise, I know very little, and I am asking questions with the hope that I'll find out what is really going on from the folks who have found the sources that I haven't yet found.


Posts: 1459; Member since: Mar 09, 2010

Lenovo took IBM PC division and look at them now I think Lenovo, and Motorola may turn a few heads in the future.

14. BattleBrat

Posts: 1476; Member since: Oct 26, 2011

I must admit they did wonders for their PC division, one of the worlds largest if memory serves. But the new think pads don't have that IBM "soul" and I fear the new motos won't either, I thought the moto X wasn't a true moto till I saw the 4G radio comparison where it buried the competition, then I knew the Moto X was a true moto, strong radios and all. We will see if moto keeps its "soul"

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