Lenovo acquires Motorola to boost smartphone business

Lenovo will buy Motorola Mobility from Google for 2.9 billion U.S. dollars, in a bid to boost its smartphone business in the Americas and access thousands of patents, the Chinese company announced on Thursday. Under the deal, Lenovo will pay 1.41 billion U.S. dollars in cash and its ordinary shares. The remaining 1.5 billion U.S. dollars will be paid over three years. The announcement came about a week after Lenovo said it would buy IBM's low-end server business for 2.3 billion dollars. The company acquired IBM's thinkpad PC business in 2004 for 1.25 billion dollars. The deal is still subject to regulatory review in the United States, but analysts say Lenovo's rising global profile and a number of cross-border deals in recent years will make it easier for the company to get the go-ahead from regulators in the U.S.. "The smartphone market is super competitive, and to thrive it helps to be all-in when it comes to making mobile devices. It's why we believe that Motorola will be better served by Lenovo, which has a rapidly growing smartphone business." Google's CEO Larry Page said in an online newsletter. He added that Lenovo will keep the Motorola brand and "has the expertise and track record to scale Motorola into a major player within the Android ecosystem." Shares of Google at NASDAQ gained 2.18 percent to 1,131 dollars in after-hours trading. Shares of Lenovo Group went through choppy trading in Hong Kong to close down 8.2 percent during the half-day trading on the eve of Chinese New Year. Google will continue to hold the patents from Motorola Mobility after the deal, but will grant Lenovo license to access its patents. "The move will boost Lenovo's smartphone business in North and Latin Americas while strengthening our market in west Europe so that they will be on par with the fast growth in emerging markets," Lenovo said in a statement. Google's 12.5 billion U.S. dollar purchase of Motorola Mobility in 2012 was widely seen as the company's strategy to boost its patent portfolio in its legal battle with rival Apple. Under Google, the smartphone maker rolled out its Moto X and Moto G android smartphone alongside its existing Droid line, but still failed to swing back to profit. Motorola Mobility reported a loss of 249 million dollars in the third quarter of 2013, up 24 percent from the same period a year ago. Antonio Wang, associate director of research firm IDC China, said the deal will bolster Lenovo's product research and development capabilities and the patent portfolio from Motorola Mobility will ease Lenovo's entry into new markets. Lenovo became the world's largest PC maker in 2013 and is ramping up efforts to grow its mobile devices business. So far the Beijing-based company is the second biggest smartphone seller in China and comes in fourth in global smartphone sales, after Samsung, Apple and Huawei. Of Lenovo's three major business lines -- PC, server and mobile devices -- both PC and server businesses have been successfully expanded on a global scale through a number of mergers and acquisitions. The purchase of Motorola Mobility marks an important milestone in Lenovo's long-term endeavor to enter the coveted U.S. and Latin America markets "Through this deal Lenovo will have a truly global market for its mobile devices, establishing a foothold in markets where the company has yet to have a presence," said Kitty Fok managing director of IDC China. Despite Motorola's dwindling market share in the smartphone business, estimated to be 1.1 percent of global smartphone shipment from the fourth quarter in 2012 to the third quarter in 2013, its close ties with major U.S. telecom operators such as AT&T, Verizon, Sprint and T-Mobile likely means bright prospects for Lenovo to expand in the U.S..