Did Google make a huge mistake with Motorola?

The news wires are alive today with the story that Google sold their Motorola mobility division to Chinese tech giant Lenovo for $2.9 billion. Google bought Motorola in 2011 for $12.5 billion. Did Larry Page make a $9.6 billion mistake? Probably not.

Although Motorola came with $3 billion in cash, and Google already sold the Motorola set-top box division for $2.4 billion, there is still $4.2 billion difference between what Google paid and what they got [12.5 – (3 + 2.4 + 2.9)]. Plus, the Motorola division was losing money. So why was this still a good buy and a good sell?

Because Google got about 17,000 Android patents in the deal. At the time of the Motorola acquisition, both Apple and Microsoft were aggressively buying up Android patents, so Google needed to secure its turf. (Of course, the patent war has kept Google’s lawyers busy with attention from the FTC and at least one successful suit brought by Microsoft.) Those patents bring in billions in licensing fees each year.

It also got a playground and proof of concept for development of a high-end, pure Android phone. (I should mention here that a new Moto X is on its way to me as we speak.) Additionally, Google retains the Motorola Advanced Research Group and Project Ara. Project Ara, a modular phone platform, “will do for hardware what the Android platform has done for software,” according to Paul Eremenko of Google. They probably also kept Motorola’s smartwatch technology, but I couldn’t confirm that. So Google hangs onto the things that have strong growth potential.

Finally, the sale of Motorola paid dividends in other ways. The Motorola purchase caused tension with Google’s semiconductor partner, Samsung, who makes the Chromebook and owns 32% of the Android phone market. This tension over Google entering the phone market gave Google some serious leverage in negotiating the recent patent cross-licensing deal with Samsung. The deal includes provisions to bring Samsung’s Android back in line with Google’s and to feature Google’s suite of apps on their phones.

Google’s adventure with Motorola demonstrates something else: Google is much more than a search engine. Google is committed to expanding its device portfolio, which is has largely done as a system company up until now. But given a series of other acquisitions, Google is also positioned to become a player in the fabless semiconductor space. More on that later.

More articles by Beth Martin…

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