Lenovo Explains Its $2.9 Billion Motorola Deal

Google is swallowing a big loss in selling Motorola for $2.9 billion and Lenovo is taking a big risk in acquiring an iconic but troubled brand.

So why are they doing it?

We think we know why Google is selling. It can’t be a coincidence that Google has reached new accords with both Samsung and European regulators.

But Google and Lenovo will get to explain themselves firsthand in a conference call set to begin in just a few minutes.

Update: Well, looks like only Lenovo did the ‘splaining, as Google and Motorola are letting their blogs do the talking. Lenovo shared some details on its plans and confirmed that Regina Dugan’s advanced research unit is staying at Google.

In other tidbits from the call, the company plans to use both the Motorola and Google brands where they are strong, and intends to keep Google’s engineering talent in Chicago and the Bay Area but won’t comment on the future of U.S. manufacturing at the new Texas plant set up to make the Moto X.


Ina Fried Ina Fried January 29, 20142:35 pm

Was on hold for awhile, but Lenovo execs talking about why they are making the deal. Motorola brand is a key asset. Company noting what the company did in 2005 with IBM PC business.

Ina Fried Ina Fried January 29, 20142:36 pm

Intellectual property also important. Even though Google keeping many patents, Lenovo getting 2,000 patents.

Plus, “We will clearly strengthen our relationship with Google.”

Ina Fried Ina Fried January 29, 20142:38 pm

Talent and expertise are also important, Lenovo says, noting Motorola has more experience than Lenovo in mature markets and in building relationships with carriers. Lenovo exec notes his first cellphone was a Motorola.

Ina Fried Ina Fried January 29, 20142:38 pm

The deal will make Lenovo “a long-term leader” exec says. (Assuming it is CEO Yang Yuanqing)

Ina Fried Ina Fried January 29, 20142:39 pm

Yuanqing quotes President Obama who said now is the time to invest in America.

“We heard him and are doing exactly just that,” Lenovo executive says.

Ina Fried Ina Fried January 29, 20142:41 pm

Q&A time: First question about current Motorola executive team and future of Moto products.

Lenovo says it can sell more volume of Moto G and make money. We can expect profitable growth in future.
Dennis Woodside will be part of the management, at least for the transition, it sounds.

Ina Fried Ina Fried January 29, 20142:42 pm

Chicago Tribune questions future of Chicago-area HQ. Lenovo says sticking with current plan and will keep office in Chicago the area.

Ina Fried Ina Fried January 29, 20142:44 pm

Will there be layoffs in Chicago or Bay Area or will company hire more in U.S.?
“We don’t have the plan to lay off people.” Motorola workers have expertise and complementary to Lenovo’s current mobile expertise (though clearly both make phones).

Ina Fried Ina Fried January 29, 20142:45 pm

In terms of patents, Lenovo also getting a good cross-license agreement, CFO says.

Ina Fried Ina Fried January 29, 20142:46 pm

Looks like this is a Lenovo-run show, so not sure we will hear from Google.

Ina Fried Ina Fried January 29, 20142:48 pm

Lenovo is the No. 2 brand in China and growing fast in some emerging markets (Indonesia, India and Russia) but had been weak earlier. “Definitely we will continue to use the Lenovo brand in those markets,” CEO says. Motorola is stronger in the U.S. and Latin America and that brand will be used there.

“Motorola is still a very famous and strong brand in China,” CEO says, so the company will rethink if it should introduce the Motorola brand there as well.

Ina Fried Ina Fried January 29, 20142:49 pm

What about U.S. manufacturing, including Texas plant that makes Moto X. Lenovo says it will evaluate what is most effective and how to win in the market (i.e. no commitment to continuing manufacturing in U.S.).

Ina Fried Ina Fried January 29, 20142:51 pm

Motorola hasn’t been selling all that well. How will Lenovo combination change that? CEO insists company has what it needs to take on Apple and Samsung with the combination of Motorola and Lenovo brands. “We have a much better IP (intellectual property) position” which will help with costs, he said, as well as a full range of products.

Ina Fried Ina Fried January 29, 20142:52 pm

Lenovo has a wide lineup covering all price bands, while Motorola has recently narrowed its lineup and has a shorter development time. “With this kind of a volume business, scale is very important.”

Ina Fried Ina Fried January 29, 20142:52 pm

Very soon company will be able to sell more than 100 million units in smartphone business, CEO said.

Ina Fried Ina Fried January 29, 20142:54 pm

Lenovo has been big in phablets. Will those come to the U.S. and under which brands? 

“We will assess the market requirements in the U.S. and Latin America” to see if it should use current products or develop new ones. “We can leverage the Motorola brand to do business in that area as well. You can expect that but probably not in the Lenovo brand.”

Ina Fried Ina Fried January 29, 20142:55 pm

Asked about Brazil — where Motorola already makes phones and Lenovo had committed to bringing models — Lenovo says both brands will co-exist in the short term but may reassess whether a two-brand strategy makes sense.

Ina Fried Ina Fried January 29, 20142:56 pm

What about Project Ara and Regina Dugan’s advanced research unit?

CEO didn’t address specifically but praised Motorola’s engineering talent.

Ina Fried Ina Fried January 29, 20142:58 pm

CFO says that Lenovo will keep Motorola’s portfolio; as for strategy of limiting range of products, Lenovo plans to leverage its existing broader lineup.

Ina Fried Ina Fried January 29, 20142:59 pm

The advanced research unit under Regina Dugan is not being acquired by Lenovo, Lenovo CEO says in answer to Re/code’s question.