Google's Motorola Adventure: Stinging Defeat, Or Semi-Victory?

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Google's Motorola Adventure: Stinging Defeat, Or Semi-Victory?

Posted by timothy on Thursday January 30, 2014 @04:00AM from the all-the-way-to-the-bank dept.

Nerval's Lobster writes "Google had previously sold Motorola's Home division for $2.4 billion. Combine that with yesterday's $2.91 billion sale of Motorola's remaining assets, subtract the $12.5 billion acquisition price for the company back in 2011, and Google's little smartphone adventure cost it roughly $7.1 billion even before you start throwing in expenses related to actual production, marketing, and personnel. That's a hefty chunk of change, but some analysts think the deal was ultimately a good one because it allowed Google to pick up patents, engineering talent, and insight into the mobile-device marketplace. It's debatable, however, whether those patents ultimately helped Android in the still-raging smartphone wars, and Google was slow to promote Motorola smartphones out of fear of irritating other Android manufacturers. At least Google can console itself with the thought that so many of its other acquisitions—including YouTube and DoubleClick—resulted in massive profits; but you can't hit a home run every time you step up to bat."

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The numbers by GeLeTo · 2014-01-30 04:08 · Score: 5, Insightful

- $3.2B Moto's 2011 cash
- $2.4B Moto's 2011 deferred tax assets
- $2.35B Moto's Set-top-box business sold in 2012
- $75M Moto's factories business sold in 2013
- $2.91B Moto's Mobility business sold in 2014

So the "patents, engineering talent, and insight into the mobile-device marketplace" cost $1.56B, not $7.1B
1. Re:The numbers by alvinrod · 2014-01-30 04:28 · Score: 4, Insightful
  
  You should also include the ~$1B loss that Google incurred as operating expenses while owning the company. It's still worth taking a loss on the sale in my opinion and that patents that they acquired may well be worth even more than the loss. Motorola was going to continue bleeding money and placed Google in an uncomfortable position with the other hardware manufacturers.
2. Re:The numbers by AlphaWolf_HK · 2014-01-30 04:29 · Score: 5, Insightful
  
  That might be well worth it though. Take a few things into consideration here:
  - Of all people, they sold it to Lenovo, who has been rather disruptive in the PC making industry; not an easy thing to do even when they first started. Remember, they took the hardware division from IBM that was doing so-so at best, crappy at worst.
  - Lenovo wanted to get into the mobile business before buying Moto. If I were to guess, they came to Google on this one rather than Google coming to them (there wasn't any rumors of "motorola for sale" that I recall...maybe I'm wrong here.)
  - Lenovo going into the mobile business with Android is a VERY GOOD THING for Google and Android in general. Think about it: The more OEM's you have pushing Android, the better, especially if they can take some of the market share away from Samsung, which I think they are probably the most well positioned OEM to do so.
  
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3. Re:The numbers by Anonymous Coward · 2014-01-30 04:29 · Score: 4, Insightful
  
  There's no way google could bring down software patents in the US while Microsoft and Apple are pushing for them, along with a massive army of legal bods. Twat.
4. Re:The numbers by GreyWanderingRogue · 2014-01-30 04:40 · Score: 3, Insightful
  
  And Google could have spent far less than $1.56B to lobby for the destruction of software patents that are costing manufacturers of Android devices billions of dollars in court, settlement, and licensing fees. But Google would rather talk out of both sides of their ass and say that they oppose software patents while taking no serious actions to work toward ending them.
  This was Motorola (inventor of the cellphone). Not all patents are software patents.
5. Re:The numbers by Dishevel · 2014-01-30 04:44 · Score: 4, Funny
  
  It is really cool that you will put yourself out like that on the internet and not even worry that you have demonstrated a complete lack of any real knowledge in the areas being discussed.
  I wish I had that kind of Moxie!
  
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6. Re:The numbers by rlwhite · 2014-01-30 04:49 · Score: 4, Informative
  
  Google said in a filing that they valued the patents at $5.5 billion: http://dealbook.nytimes.com/20...
7. Re:The numbers by DickBreath · 2014-01-30 06:55 · Score: 5, Funny
  
  Yes, but Motorola's patents are on trivial things such as radio technology, modulation techniques, compression and encoding, antenna designs, digital signal processing techniques, using very little power, frequency hoping, GSM, and other things.
  
  Those patents are insignificant next to the innovations of bouncy scrolling and pinch to zoom!
  
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Not the whole story by DeathToBill · 2014-01-30 04:10 · Score: 5, Insightful

I've seen pretty convincing analysis today showing that, when you take the tax benefits of the deal and Motorola's cash position into account, Google is about $1bn to the good out of the deal, and it's retaining the patents. So it has bought a loss-making company for $12bn, broken it up into bits it can sell for around $5bn, got $3bn cash out of it, and about $6bn off its tax bill over the next six years, while gaining a large and important patent portfolio. Doesn't look look like a loss to me.

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1. Re:Not the whole story by Bill,+Shooter+of+Bul · 2014-01-30 04:32 · Score: 5, Funny
  
  A billion here, a billion there, pretty soon, you're talking real money
  
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2. Re:Not the whole story by TraumaHound · 2014-01-30 05:00 · Score: 4, Informative
  
  At least 5200.
  About 4000 in August 2012 and another 1200 in March 2013.
Asset stripped.. by Dynamoo · 2014-01-30 04:13 · Score: 3, Insightful

Asset stripped and dumped. Thanks, Google.

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1. Re:Asset stripped.. by jratcliffe · 2014-01-30 05:03 · Score: 3, Insightful
  
  Asset stripped and dumped. Thanks, Google.
  Classic case of whole being less than the sum of the parts.
  Motorola Mobility consisted of:
  1. a handset business
  2. a set top box business
  3. a patent portfolio
  4. a bunch of cash
  5. a bunch of tax assets, which the company couldn't use because it wasn't making enough money
  Google wanted the patent portfolio, so it bought the company (the price of which incorporated the cash), utilized the tax assets (which had been worthless until MM was purchased), sold the set top box business to a set top box maker (Arris), and is now selling the handset business to a company in the handset business.
  This isn't "asset stripping," since the pieces are worth more, and can be more successful, as separate pieces. It's breaking up a conglomerate that didn't make sense.
Re:who cares? by bhagwad · 2014-01-30 04:21 · Score: 5, Insightful

It doesn't matter if it doesn't matter. It's interesting and that's all that matters!
Re:who cares? by Oysterville · 2014-01-30 04:41 · Score: 3, Insightful

Stock holders do.
Google sucks at this by bill_mcgonigle · 2014-01-30 04:57 · Score: 4, Insightful

I got up early for Motorola's Black Friday sale to get a developer's edition Moto X. They launched three hours after their advertised start time. Once their systems came online, I got an order in in less than three minutes. I got an order confirmation and hours later Motorola staff was posting on social media, urging people to buy the model I got. The next day, they send me a cancellation notice saying they have no stock and they're not going to honor my order, despite offer and acceptance.
Google sucks at anything that requires anything that resembles customers service. Humans don't map/reduce well.

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Samsung by saleenS281 · 2014-01-30 05:11 · Score: 5, Interesting

The Moto X was actually an outstanding phone. I dumped my gs3 for one. I think the real end-game here was getting Samsung back in line. Motorola phones were selling enough units to raise alarms at Samsung. It's not like Samsung was in any danger of losing their stranglehold on android phone sales in the short term, but long-term with Google's backing it was only a matter of time until Motorola started taking significant chunks. End result: Samsung has supposedly agreed to dump it's custom UIs and custom applications and fully embrace the Play store and the Google ecosystem. It seems unlikely the timing is just a coincidence.

http://gigaom.com/2014/01/29/report-samsung-to-hold-the-touchwiz-on-future-android-devices/
1. Re:Samsung by saleenS281 · 2014-01-30 08:58 · Score: 3, Interesting
  
  Ya, you have your history of events backwards. Samsung created Bada in 2010 not too long after Google started going after third parties who were including their apps without approval (read cyanognmod). Google acquired Motorola in 2011 AFTER Samsung started creating their own OS and their own ecosystem to compete directly with Google. Samsung continued down that path until this year, interestingly enough, just after the holiday season in which the Moto X started picking up steam. I'm guessing when Samsung saw VZW approve kitkat for the Moto X almost immediately after release, they saw how screwed they were going to be going forward. As a consumer, when your choice is Motorola with updates immediately after release and minimal bloatware, or Samsung who can be upwards of a YEAR later on VZW and an interface that you either love or hate, the choice is pretty easy. I can tell you I've personally steered at least 10 people away from Samsung and onto a Moto X after letting them play with my phone for 5 minutes and showing them that the spec sheet doesn't always tell the full story.
lost of course in the story are the Employees by BrianTarbox · 2014-01-30 05:55 · Score: 5, Insightful

Not surprising of course but zero mention of the employees of Motorola Mobility and Motorola Home who got whipsawed back and forth these last few years. I remember celebrating back when Google bought "us" a few years back...only to quickly see that they had zero interest in anything but the patents. So happy to have gotten out early.
1. Re:lost of course in the story are the Employees by symbolset · 2014-01-30 06:45 · Score: 3, Informative
  
  Google didn't send a CEO to Moto to drive the business into the ground prior to acquisition and drive the price down. Motorola Mobility did that to themselves before Google got involved. They put the business in such a state that Google had to either buy it or let the patents for the cellular phone go to patent trolls. Those patents include codec patents important for Google's free and open codec. People seem to be forgetting that piece.
  
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Re:it went exactly as planned by alexander_686 · 2014-01-30 07:53 · Score: 3, Interesting

I think they got rid of the handset division as fast as the tax law would allow. Take a look at this way.
Motorola (M) could get a higher price is they sold their business as a packaged deal, Motorola Mobility (MM). They got more bidders that way. (It’s not exactly what they did, but it was effectively what they did when they spun off that division.)
Google wanted the patents but not the hardware division for the reason you mentioned but they had to buy both. They wanted to get rid of it as fast as possible.
Assuming MM was spun off from M in a tax free spin off, one normally has to wait about 2 years before one can sell off a division. If it was sold off before then it would trigger a big tax bill for MM. Most spin off require the spun off division to pay their parent’s tax bill if they are bought out.
So we wait 2 years and 6 months and guess what happens – Google sells off the handset division.