Aardvark Daily

Please visit the sponsor!

Google hangs up on mobile business

At first glance, Google's sale of the cellphone business "Mobility" it purchased from Motorola just a few short years ago would seem to be a major loss for the search-engine giant.

Back in 2012, Google paid a hefty $12.4 billion for the business but this week it announced that it will be flicking it off to Lenovo for a paltry $2.9 billion.

What the?

Once you look a bit more closely however, it becomes apparent that Google may not have lost the almost $10 billion that you might think.

Although it's selling the manufacturing business and branding, Google is hanging on to many of the very valuable patents it collected as part of the original purchase and, as we all know -- patents can be incredibly valuable, both as a way of earning direct revenues and as a way of bartering with your peers for access to their technology.

Another factor in the sale may well have been the unsustainable position Google would have found itself in if it had remained in the mobile marketplace -- effectively competing with its own clients who license the Android operating system from them.

This would have left the door open for anti-trust lawsuits from any competitor who felt that Google may have been favouring its own mobile products due to the obvious benefits that such bias would deliver.

After the sale, Google may look a bit cash-poorer but $10bn is nothing to a company with the reserves and turnover that it enjoys. What it has lost in terms of raw cash, it has more than made up for by the very lucrative additions to its patent portfolio and the protection it provides for its other products and technologies.

Some commentators are suggesting that Google will have cherry-picked very critical technologies from the former Motorola company and will be using those in its own "wearable tech" -- including stuff like Google Glass.

On the other end of the deal, Lenovo seems to be a company that has done well by buying the cast-offs of other hi-tech giants.

Although the company was formed back in 1984 (trading under the name "Legend"), it was pretty much unknown in the West until it bought IBM's ailing personal computer business in 2005. On the back of that purchase it has grew to become the world's largest PC vendor (by unit sales) in 2013.

This year it is also scheduled to purchase IBM's Intel-based server market, further strengthening its position.

Given that Lenovo is also the largest manufacturer of smartphones in mainland China, its purchase of Mobility from Google looks like another clever strategic move.

Looking at the size of the numbers being thrown around by these corporate giants makes it even more apparent why NZ ought to be focusing on attracting this type of business to our shores rather than castigating good honest Kiwis for using their credit-cards online. :-)

Please visit the sponsor!

(Sorry, forums are stuffed at present)

PERMALINK to this column

Rank This Aardvark Page

Change Font