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Lenovo said Thursday that it has closed its acquisition of Motorola Mobility, gaining a larger foothold in the US and other developed markets.
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Under the agreement, Lenovo will pay former parent Google $2.91 billion, including $660 million in cash and $750 million in newly issued Lenovo stock. The remaining $1.5 billion will be paid to Google in the form of a three-year promissory note. While Lenovo gets Motorola’s mobile device business, Google keeps the patent portfolio.
The transfer of Motorola to Lenovo from Google marks the end of a short chapter for the storied handset vendor. Credited with the invention of the cellphone, Motorola had suffered over the last several years as Apple’s iPhone and Samsung’s Galaxy lineup rose in prominence. Under Google, Motorola had refined its product portfolio to just a few devices, and developed a focus on the low end and on emerging markets with its affordable Moto G and Moto E smartphones.
The combined operations will have 8 percent of the global smartphone market, making it the third-largest smartphone vendor in the world, according to Strategy Analytics. The research firm said the two businesses will benefit from increased scale, deeper distribution channels and bigger marketing and R&D budgets, but must contend with a slowdown in growth at Lenovo and Motorola’s continued losses.
“Merging these two firms next year will not be as easy as many expect,” the firm said in a post.
Motorola will continue to operate out of Chicago and will still be led by President and Chief Operating Officer Rick Osterloh.
“With an impressive portfolio of smartphones, wearables and PCs, our two companies will be uniquely positioned to push the boundaries of choice and value, and bring exciting new experiences to people everywhere,” Osterloh said in a blog post.
He added later that he doesn’t believe Motorola’s strategy of using an unaltered version of Android with a few software additions would change under Lenovo, which more heavily customizes its Android smartphones.
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For Lenovo, which has a stronger reputation as the No. 1 PC manufacturer in the world, Motorola lends the company badly needed credibility in the smartphone business. Motorola gives Lenovo a recognizable brand in most developed markets, especially the US, where it also has strong relationships with the wireless carriers.
Motorola will continue to be the primary brand in areas where it already has a strong position, but in emerging markets, both the Lenovo and Motorola brands we sit alongside each other, said Lenovo CEO Yang Yuanqing on a press conference call.
Liu Jun, executive vice president and president of Lenovo’s mobile business group, will serve as chairman of the Motorola Management Board.
“The R&D on both sides (Lenovo in China, Motorola in the US) is a treasure of the combined business,” Jun said on the call.
Jun said he expects to sell more than 100 million mobile devices in the fiscal year ending March — including smartphones and tablets. The company also reiterated its goal of getting Motorola back to profitability within four to six quarters. While Motorola will be run as a separate business, it will be able to take advantage of Lenovo’s supply chain and sales force.
Motorola over the last two months has unveiled a number of strong products, including a revamped Moto X and Moto G, the Nexus 6 for Google, as well as Tuesday’s debut of the Droid Turbo for Verizon Wireless. Yangqing touted the strength of the recent products, and said Lenovo would continue to support them.
Lenovo also addressed the rumor that it was interested in acquiring business smartphone maker BlackBerry. Yangqing said he already had two deals to integrate — Motorola as well as the acquisition of IBM’s server business — but declined to comment specifically on BlackBerry.
“We need to focus on two big deals. If we want another big deal, we need to make money off of these deals first,” he quipped.
Updated at 8 a.m. PT: To include additional executive commentary from the conference call.
