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Lenovo Group and Google have entered into an agreement under which Lenovo plans to acquire the Motorola Mobility smartphone business. The takeover will immediately make Lenovo the world’s third largest maker of smartphones and will let it gain a strong market presence in North America and Latin America, as well as a foothold in Western Europe.

In 2013 Lenovo sold 45.5 million smartphones (up from 23.7 million in 2012), according to IDC, and controlled about 4.5% of the global smartphone market. Motorola Mobility shipped approximately 10 million of smartphones in 2013. Since Lenovo and Motorola did not compete in 2013 (because Lenovo’s phones are not available in the U.S. and Western Europe), their shipments can now be combined. With the takeover of Motorola Mobility, Lenovo becomes the globe’s No. 3 supplier of smartphones with 55.5 million units sold yearly. Two competitors, which are ahead are Apple (153.4 million) and Samsung (with 313.9 million).

“The acquisition of such an iconic brand, innovative product portfolio and incredibly talented global team will immediately make Lenovo a strong global competitor in smartphones. We will immediately have the opportunity to become a strong global player in the fast-growing mobile space,” said Yang Yuanqing, chairman and CEO of Lenovo.

Lenovo, which in 2005 acquired IBM’s PC business and its legendary Think brand, will now acquire world-renowned Motorola Mobility, including the Motorola brand and Motorola Mobility's portfolio of innovative smartphones like the Moto X and Moto G and the Droid Ultra series.  In addition to current products, Lenovo will take ownership of the future Motorola Mobility product roadmap.

Google will maintain ownership of the vast majority of the Motorola Mobility patent portfolio, including current patent applications and invention disclosures. As part of its ongoing relationship with Google, Lenovo will receive a license to this rich portfolio of patents and other intellectual property.  Additionally Lenovo will receive over 2,000 patent assets, as well as the Motorola Mobility brand and trademark portfolio.

“Lenovo has the expertise and track record to scale Motorola Mobility into a major player within the Android ecosystem.  This move will enable Google to devote our energy to driving innovation across the Android ecosystem, for the benefit of smartphone users everywhere,” said Larry Page, chief executive officer of Google.

The purchase price is approximately $2.91 billion (subject to certain adjustments), including $1.41 billion paid at close, comprised of $660 million in cash and $750 million in Lenovo ordinary shares (subject to a sharecap/floor). The remaining $1.5 billion will be paid in the form of a three-year promissory note.

 “We are confident that we can bring together the best of both companies to deliver products customers will love and a strong, growing business. Lenovo has a proven track record of successfully embracing and strengthening great brands – as we did with IBM’s Think brand – and smoothly and efficiently integrating companies around-the-world.  I am confident we will be successful with this process, and that our companies will not only maintain our current momentum in the market, but also build a strong foundation for the future,” said Mr. Yuanqing

The transaction is subject to the satisfaction of regulatory requirements, customary closing conditions and any other needed approvals.

Tags: Lenovo, Motorola, Motorola Mobility, Business

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