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Lenovo has reached an agreement with Google for the purchase of the search giant's Motorola Mobility smartphones for an estimated US$ 2.9 billion.
The terms of the deal include a payment of $600 million in cash, $750 million in Lenovo ordinary shares and $1.5 billion paid through a three-year promissory note. Motorola, which was acquired by Google in 2011 for US$ 12.5 billion, includes the well-known Moto X, Droid and Razr brand smartphone handsets. Google will retain the majority of patents it acquired from Motorola and license their use to Lenovo in any future phones it produces.
Google CEO Larry Page admitted in a company blog post that the main reason for the purchase of Motorola was to acquire the patents needed to further develop its Android operating system. He described Lenovo as being in a better position to help Motorola provide innovative products to a wider audience.
This is Lenovo's second major purchase in the past month. Just last week, it announced that it would pay US$ 2.3 billion for IBM's low-end server business. With the global market for personal computers (PC) contracting by nearly 10% last year, analysts say the move makes sense for Lenovo as it looks to branch out beyond manufacturing PCs.
"With the recent launches of Moto X and Moto G, we have tremendous momentum right now," said Motorola CEO Dennis Woodside.
"Being part of the Lenovo Group, with their hardware expertise and global reach, will only accelerate this," Woodside added.
Motorola not only gives Lenovo an established brand of smartphones internationally and in China but also provides them with established relationships with a number of telecom operators across the globe such as AT&T and Verizon.
It also makes sense for Google. Even with the backing of the search giant, Motorola has struggled to make a profit which made investors nervous. Selling the unit allows Google to focus on its core business of providing service technology to hardware makers.
