Google Takes $7B Hit In Motorola Sale

Hardware dreams crash in ill-fated acquisition

Google’s Motorola adventure came to an abrupt end today, as the search giant unloaded the smartphone maker for a more than $7 billion loss. It’s the best money Google ever lost according to Wall Street, which never liked the acquisition.

Google sold Motorola Mobility to Lenovo for $2.9 billion, less than two years after it bought the US hardware manufacturer for $12.5 billion.

CEO Larry Page is taking a $7.2 billion hit from Google’s ill-fated acquisition. With Motorola, Google was trying to replicate Apple’s success manufacturing devices, developing software and selling services.

The deal however threatened to strain relationships with Motorola competitors who used Google’s Android software for their smartphones and tablets. Also, many on Wall Street were critical of the Motorola buy for the simple fact that it would drain resources and weigh on Google’s bottom line driven by its advertising cash machine.

Why introduce a low-margin—or worse money-losing—business onto its balance sheet, the thinking went.

Google already worked with manufacturers to deliver its Nexus brand of smart devices, and it still does. The Nexus devices have proved more popular than any that Google built through Motorola. Google only this year introduced the first smartphone that it said came from its union with Motorola, the Moto X. The fast sale of Motorola after the launch of the device is a sign that it failed in the market, analysts said.

Google didn’t even have a chance to develop a Motorola tablet. However, it does build Nexus tablets with Asus.

When Google bought Motorola it was billed as a deal to provide some patent protection at a time when intellectual property was trading at a premium. Google will still benefit from the patents, according to the deal structure with Lenovo.

Clearly, Google still has some hardware ambitions, as it plans on releasing Google Glass later this year. The company also bought smart thermostat maker Nest this month, Google’s second-largest acquisition after Motorola. Even though the Motorola sale lost billions, Google’s stock was up after hours nearly $30 to $1,136 a share.

Recommended articles