Google gives up on smartphones: A closer look at the sale of Motorola to Lenovo

It has been almost two years since Google completed the purchase of Motorola’s handset division, but its experiment in trying to be a competitive smartphone maker has finally come to an end. While there were always plenty of doubters – starting with me – concerning the wisdom of Google entering the handset business, Google never wavered publicly about its commitment to the challenge.

Eventually the reality of how hard it is to compete in the smartphone market without taking your eye off the ball in other areas sunk home to Google – likely with the disappointing sales of its much-anticipated and much-trumpeted Moto X phone.

Larry Page admitted as much in his blog post announcing the sale: “… the smartphone market is super competitive, and to thrive it helps to be all-in when it comes to making mobile devices.”

This point was no doubt driven home by the fact that the Motorola division lost Google almost $1 billion (£610 million) in 2013. Lenovo will pay $2.91 billion (£1.75 billion) in cash to acquire Motorola Mobility’s handset division – some parts of the company, including most of the patents, will stay with Google.

Lenovo knows about smartphones

When I toured Lenovo’s private suite at CES this year, one thing I didn’t expect to see was a selection of pretty amazing smartphones. Since Lenovo doesn’t sell phones in the US or Western Europe – yet – it doesn’t get much attention as a smartphone maker from the tech press. But in a few years it has become the fastest growing maker of smartphones, with 45 million units shipped in 2013.

What about future products?

While in some ways this deal echoes Lenovo’s purchase of IBM’s ThinkPad brand, there is one major difference – Lenovo already has a fairly broad, excellent, line of smartphone products, and a team that designs them. Without question some of the unique features of the Moto X, like always-on listening and custom covers, are worth keeping around, but it is hard to see Lenovo continuing both its own smartphone product lines and Motorola’s indefinitely. There will need to be some consolidation. Both companies have been silent about whether there will be a continued commitment to building some of the Motorola products in the USA. It is possible that regulators – already sensitive about Chinese companies purchasing flagship American technology names – may impose some conditions on the deal that affect this.

Current Lenovo phones are more traditional in approach than Motorola’s, with excellent hardware, great displays, and straightforward implementations of Android. They are also showing faster sales growth than almost any other line of phones. Motorola’s Moto X and Moto G have broken new ground in many areas, but they have hardly taken the UK or US market by storm. Lenovo has said it will keep the Motorola brand separate, but it hasn’t said what that means regarding how it will merge the product lines. For those worried about the fate of the Ara modular phone research project, it is staying with Google and being moved to the Android group.

Will Lenovo play The Stig for Google?

Fans of hit series Top Gear are familiar with its “tame race car driver,” aka The Stig. The show gets to assign him all sorts of tasks, which he performs seemingly without complaint. Similarly, Google was likely looking for a more pliable business partner for Android than the hard-to-predict Samsung. With Samsung pushing its own app store and media hub, as well as Tizen – its Android alternative – Google probably wants to make sure it’s putting its mobile hardware jewels in more reliable hands.

At the same time, Google clearly cannot afford to upset Samsung, on which it relies for the largest slice of Android sales. So it may not be a coincidence that the Lenovo deal was announced at just about the same time that Google and Samsung entered into a worldwide patent cross-licensing deal.

Personally, I’m excited by this deal – and not just because I said nearly two years ago that Google should sell Motorola. I’ve long been a fan of what Lenovo has done with the ThinkPad and IdeaPad product lines. With HTC in trouble, there hasn’t been a good competitor for Samsung in the Western market for high-end Android phones. If Lenovo can combine some of the Moto X’s unique features, along with the excellent handset designs it is shipping around the world, consumers everywhere will benefit.