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How 'Lenovorola' changes the mobile world

How 'Lenovorola' changes the mobile world

Google is selling Motorola to Lenovo. The deal makes Google better, Lenovo bigger and Motorola gets a new lease on life.

You may have heard that Google sold Motorola Mobility to Lenovo. Although that's not exactly what happened, the transaction will probably change the mobile industry completely.

First, let's be accurate about what transpired.

Two years ago, Google acquired Motorola Mobility for $12.5 billion. And, yes, this week Google announced its intent to sell Motorola Mobility -- for $2.3 billion.

But Google didn't sell everything it bought. Google basically stripped the acquired entity for parts and kept the most important bits: 15,000 of Motorola Mobility's 17,000 patents.

Before selling the handset business to Lenovo, Google had sold Motorola Home, the company's TV set-top box business, to a company called Arris for $2.6 billion a little over a year ago.

The Motorola Mobility patent portfolio gave Google, as the creator of Android, an immediate short- and long-term advantage in the ugly patent wars that plague the mobile industry. Google was instantly able to defend itself against Apple and others in the courtroom. (Google has valued Motorola's patents at $5.5 billion.)

As part of the original Motorola acquisition, Google also bought Motorola's innovative advanced research and development group, currently headed by the former head of the U.S. military's research and development wing, Regina Dugan. The group is famously working on modular smartphones, electronic tattoos and smart pills. Yeah, Google's keeping that group. (Oddly, it's keeping the R&D division in the Android group, rather than folding it into its own Google X labs.)

The sale also gives Google five benefits generally unnoticed in the popular accounting.

First, Google gets to stop losing money on Motorola. The Motorola unit cost Google nearly $1.3 billion last year. Selling the unit may have saved Google the loss of another billion this year and maybe another billion after that.

Second, the sale will improve Google's relationship with Samsung, the world's biggest smartphone maker and the company that makes about one-third of the world's smartphone handsets. Now that Google is no longer a direct competitor, Samsung can pursue less ambiguous policies around its apps, its interfaces and its alternative operating system ( Tizen). Already, some observers are suggesting that the agreements between Google and Samsung announced this week -- in one case an agreement to make Samsung's new Magazine UX interface more Google-apps friendly, and in the other case a deal to cross-license patents between the two companies -- may have been based on the knowledge that Google was selling Motorola.

Third, it's possible that Google now has a friend in China. Google's search engine market share in China is only 1.6%. Just 3.5% of Android devices in China use Google's Play Store. Although Android dominates the Chinese smartphone scene, Google is a marginal presence there. The Motorola sale involves giving Google a roughly 5% ownership in Lenovo. It seems likely that Lenovo will offer Google services and apps and the Play Store on its Chinese phones, even as Lenovo grows to dominate the market there.

Fourth, the sale of Motorola improves Google's relationships with all Android phone makers because, again, it's no longer a direct competitor.

And finally, Google can enjoy a new focus on the core businesses that matter -- businesses that involve algorithms and vast data centers.

The sale of Motorola, though reported as a big loss, really changes everything for Google in a positive way.

It also changes everything for Lenovo.

In the U.S., people think of Lenovo primarily in connection with its acquisition of IBM's ThinkPad line long ago. But Lenovo is a major player in China.

The purchase of Motorola will give Lenovo more than 50 international carrier relationships, including all four major U.S. carriers. Those relationships give Lenovo an E-Z pass into international markets with Motorola phones today and with Lenovo-designed and -built phones tomorrow.

It also makes Lenovo the world's No. 3 smartphone maker, behind Samsung and Apple. (The company is already the world's biggest PC maker.)

Ironically, the company least affected by all this in the short term is likely to be Motorola. Lenovo has suggested that for the foreseeable future, it's going to be business as usual.

Motorola is at the forefront of a movement to assemble computers and phones in U.S. factories.

That movement includes other companies, such as Apple. But Motorola is doing something unprecedented with its U.S. manufacturing operations: It's custom-building phones to order and delivering them within four days.

It's unclear whether that's a winning strategy from a business perspective, but Lenovo issued a statement saying "there are now no plans to change Motorola's approach to manufacturing." Of course, it's unknown if plans will exist later.

And Lenovo has proved to be open to the idea of U.S. manufacturing -- some ThinkPads, for example, are built in North Carolina.

Lenovo is one of the most successful companies in the world at acquiring companies and turning them into international success stories. A key element of that success is: If it ain't broke, don't fix it. I think it's likely that Lenovo will let Motorola continue on its current trajectory, complete with its custom manufacturing business, which turns out devices with wood backing, X8-driven contextual control and feedback and all the rest.

In short, the deal remakes Google by turning the company into a more focused organization, improving its relationships with partners and leaving it with a powerful patent portfolio. It also remakes Lenovo into a genuinely global brand and one of the top consumer electronics companies in the world.

It's a great reshuffling that will probably benefit consumers quite a bit. Google's a better Google. Lenovo's a bigger Lenovo. And Motorola Mobility probably gets to keep being Motorola Mobility.

This article, " How 'Lenovorola' Changes the Mobile World," was originally published on Computerworld.com.

Mike Elgan writes about technology and tech culture. You can contact Mike and learn more about him on Google+. You can also see more articles by Mike Elgan on Computerworld.com.

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