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China’s Lenovo to buy Motorola phone business from Google, but will regulators approve?

China's Lenovo to buy Motorola phone business from Google

Google (NASDAQ:GOOG) has confirmed that it’s selling Motorola Mobility – the phone-maker division of Motorola that it acquired in 2012 – to Lenovo (HKG:0992) for $2.91 billion.

Google CEO Larry Page, in a post to the Google official blog on Wednesday, said they acquired Motorola “to help supercharge the Android ecosystem by creating a stronger patent portfolio for Google and great smartphones for users.” He then explains:

But the smartphone market is super competitive, and to thrive it helps to be all-in when it comes to making mobile devices. It’s why we believe that Motorola will be better served by Lenovo—which has a rapidly growing smartphone business and is the largest (and fastest-growing) PC manufacturer in the world. This move will enable Google to devote our energy to driving innovation across the Android ecosystem, for the benefit of smartphone users everywhere.

Motorola brand lives on

Page notes this won’t effect Google’s other hardware efforts, which is likely a reference to devices like the Nexus range of phones and tablets that it makes with a range of manufacturers.

Lenovo will keep the Motorola brand alive alongside its own thriving phone and tablet portfolio. Lenovo chairman and CEO Yang Yuanqing said this morning that it expects to sell 100 million handsets in the year after it completes the Motorola deal. Yang added that Lenovo “can further grow the business, not just in the US and Latin America, where [the Motorola brand] is strong today. We will also introduce the Motorola brand in other markets so we can have decent growth.”

“Google will retain the vast majority of Motorola’s patents, which we will continue to use to defend the entire Android ecosystem,” Page says. Lenovo will license these, notes a separate release from Google.

As a hardware company, Motorola was a strange purchase for Google. Yes, it mostly needed it for the patents to defend Android phone-makers from lawsuits or costly licensing deals. But the Motorola phone business was a costly, loss-making venture that required Google to appease other Android phone manufacturers by not giving Motorola any preferential treatment.

Plus, Google’s strip-down of Motorola’s bloated product line-up left it lacking new models in a lot of key markets – especially Asia – at a time when booming smartphone ownership saw Asian consumers turn to brands like Samsung, LG, and Huawei, or local ones like Xiaomi in China or Micromax in India. Motorola is pretty much dead in Asia, and now Lenovo needs to bring it back to life with global relevance.

Will regulators allow it?

Larry Page notes: “The deal has yet to be approved in the US or China, and this usually takes time.” Indeed, on such a sensitive issue as telecommunications, there’s a risk of American regulators being spooked by the involvement of a Chinese firm.

Lenovo, which bought the IBM PC business in 2005 and then its server business earlier this month, is a familiar name, but we can expect a contentious review period for this massive deal. Lenovo is not as controversial a business as Huawei, which American regulators fear is linked too closely with the Chinese government, but the scene is set for a lot of probing of Lenovo.

(Editing by Josh Horwitz)


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