Per Reuters:
Lenovo to buy Google's Motorola in China's largest tech deal
(http://s1.reutersmedia.net/resources/r/?m=02&d=20140129&t=2&i=833753733&w=580&fh=&fw=&ll=&pl=&r=CBREA0S1MNH00)
(Reuters) - Lenovo Group said on Wednesday it agreed to buy Google Inc's Motorola handset division for $2.91 billion, in what is China's largest-ever tech deal as Lenovo buys its way into a heavily competitive U.S. handset market dominated by Apple Inc.
It is Lenovo's second major deal on U.S. soil in a week as the Chinese electronics company angles to get a foothold in major global computing markets. Lenovo last week said it would buy IBM's low-end server business for $2.3 billion.
The deal ends Google's short-lived foray into making consumer mobile devices and marks a pullback from its largest-ever acquisition. Google paid $12.5 billion for Motorola in 2012. Under this deal the search giant will keep the majority of Motorola's mobile patents, considered its prize assets.
Shares in Google climbed 2.2 percent to about $1,131 in after-hours trading. Reuters reported the deal earlier on Wednesday, citing sources familiar with the deal.
The purchase will give Lenovo a beach-head to compete against Apple and Samsung Electronics as well as increasingly aggressive Chinese smartphone makers in the highly lucrative U.S. arena.
In 2005, Lenovo muscled its way into what was then the world's largest PC market by buying IBM's personal computer division. It has powered its way up the rankings of the global smartphone industry primarily through sales on its home turf but has considered a U.S. foray of late.
"Using Motorola, just as Lenovo used the IBM ThinkPad brand, to gain quick credibility and access to desirable markets and build critical mass makes a lot of sense," said Forrester Research analyst Frank Gillett.
"But Motorola has not been shooting the lights out with designs or sales volumes in smartphones. So the value is simply in brand recognition to achieve market recognition faster - and to expand the design and marketing team with talent experienced at U.S. and Western markets."
The deal is subject to approval by both U.S. and Chinese authorities.
Chinese companies faced the most scrutiny over their U.S. acquisitions in 2012, according to a report issued in December by the Committee on Foreign Investment in the United States. Analysts say political issues could cloud the deal, especially with Lenovo trying to seal the IBM deal at the same time.
In the deal for the Motorola handset business, Lenovo will pay $660 million in cash, $750 million in Lenovo ordinary shares, and another $1.5 billion in the form of a three-year promissory note, Lenovo and Google said in a joint statement.
RISE OF THE CHINESE
In two years, China's three biggest handset makers - Huawei, ZTE Corp and Lenovo - have vaulted into the top ranks of global smartphone charts, helped in part by their huge domestic market and spurring talk of a new force in the smartphone wars.
Huawei declined to comment on the deal on Wednesday.
In the United States, the Chinese companies continue to grapple with low brand awareness, perceptions of inferior quality and even security concerns. In the third quarter of last year, ZTE and Huawei accounted for 5.7 percent and 3 percent of all phones sold in the United States, respectively, trailing Apple's 36.2 percent and Samsung's 32.5 percent, according to research house IDC.
Lenovo had negligible market share.
Globally, however, Lenovo ranked fifth in 2013 with a 4.5 percent market share, according to IDC. That's up from 3.3 percent in 2012 and virtually nil a couple years before that.
On the Google front, the Internet company has struggled to turn around loss-making Motorola. Now it's willing to step back from the hardware arena and throw its weight behind handset makers that propagate its Android software, Kantar analyst Carolina Milanesi said.
"It all points to Google thinking in the short run that they're better off betting on Samsung and keeping them close," Milanesi said. "And of course now they're enabling a second strong runner (Lenovo) in the Android ecosystem."
Analysts had seen Google's Motorola acquisition as primarily a way to secure the company's trove of patents amid the technology sector's increasing legal battles.
Many industry observers were surprised that Google did not immediately sell the hardware division after the deal closed, choosing instead to operate Motorola a separate company.
It did sell Motorola's cable television set-top box business to Arris Group Inc for $2.35 billion at the end of 2012.
Per PCmag.com;
(http://www4.pcmag.com/media/images/411952-lenovo-vibe-z.jpg?thumb=y)
5 reasons why this deal went down.....
Why Google Sold Motorola
1. Google's mobile strategy is to get Android onto as many phones as possible, as almost all of the company's revenue comes from advertising, including on mobile devices. This is very different from Apple, BlackBerry, and Microsoft, which are all now integrated hardware-software businesses.
2. Google wanted Motorola for the patents, not for the manufacturing. Apple's patent attack on Android licensees was slowing down and worrying Google's customers. Motorola had a massive patent library that can be used defensively.
3. Once Google bought Motorola, some of its major licensees started hedging their bets and developing or buying their own non-Google OSes: Samsung with Tizen and LG with WebOS, for instance. They were worried Google would compete directly with them.
4. Motorola never made Google any money.
5. By ditching Motorola, Google can be a neutral, honest broker of operating systems to the world and make money doing so.
Why Lenovo Bought Motorola
1. Lenovo is one of the world's top five smartphone makers, but its market share in the U.S., one of the world's largest smartphone markets, is zero. Motorola has an 85-year history in the U.S. and, at this point, pretty poor distribution elsewhere.
2. The company's biggest business is still PCs, and it's the world's No. 1 PC maker. But PC sales aren't growing. If Lenovo is going to be a technology leader in the late 2010s, it needs to be a mobile tech leader. Assembling a global smartphone business is key.
3. Lenovo has experience integrating and running U.S.-based technology companies. It bought the ThinkPad business from IBM and led it to success, and it now has a manufacturing plant in Whitsett, N.C. making Think-branded products.
4. Getting into the U.S. market is all about relationships with U.S. carriers. Motorola's relationships are really, really good: it has the ongoing Droid deal with Verizon Wireless, and it's placed the Moto X on three out of our four national carriers.
5. Lenovo doesn't just want to be a consumer smartphone maker. It has very strong enterprise relationships with its ThinkPad and ThinkCenter products, and it just bought IBM's low-end server business. By now also offering phones, it can deliver full technology packages to its U.S. business clients.