Let's set things straight right at the beginning. This is not a story about Google finally selling off its Motorola Handset group—which has been a drain on earnings for Google since the day it first brought them in house after shelling out $12.5 billion for the company.
The key news as far as Google is concerned is that it retains the roughly 17,000 patents portfolio that came with the Moto acquisition and that was Google's target all along. Following the sell-off of Moto's set top box division for $2.5 billion, factoring in that Moto had about $2 billion in cash in hand, and factoring in the $2.9 billion it is about to collect from Lenovo, that patent portfolio cost Google roughly $4.5 billion all told.
So much for Google—this is really a Lenovo story we're looking at today. If you are interested in Google's story from Larry Page's end of things, you can read Page's blog post on it—which essentially says nothing more than the obvious. The deal details from Google's formal press release notes the following: The purchase price is approximately $2.91 billion, including $1.41 billion paid at close, comprised of $660 million in cash and $750 million in Lenovo ordinary shares. The remaining $1.5 billion will be paid in the form of a three-year promissory note.
Just yesterday we took note that the Chinese high end smartphone market is set to grow at least 1,500 percent this year. In that article we noted that Chinese player Lenovo currently sits in the number two spot behind Huawei relative to who sells the most smartphones in China. Several weeks ago we detailed Lenovo's acquisition of IBM's low end server business. And yesterday, following Lenovo's announcement that it was reorganizing itself into four distinct business groups, it followed up with the announcement that the company is adding Moto's handset team to the mix as well - which fully dresses out the mobile devices business that now makes up one of the four new pillars of Lenovo's corporate structure.
We must say, we find Lenovo's efforts here to be well-designed, and all of it is taking place at exactly the right time for each of the four groups the company will be building its immediate future on. The new groups are as follows:
Finally, Lenovo also noted that Peter Hortensius, who currently in charge of Lenovo's Office-PC business, will become Lenovo's chief technology officer. CEO Yuanqing remains in charge of the overall company.
image via shutterstock
Though we can note the new Lenovo structure here, we can't really do much in terms of determining how well the four new groups will operate. At some level all four must clearly coordinate with each other. Although at first blush one might suggest that the PC Group may be in decline while the new Mobile Group is ascendant - will this cause friction between them? PCs have of course been Lenovo's real and extremely successful claim to fame (ever since it acquired IBM's ThinkPad business) while the mobile team is the upstart that has to prove itself here.
But—and it is a big but—Lenovo focuses on enterprise computing and PCs remain hugely robust within the enterprise on the sales front. This is what makes Lenovo a rock solid business. Never the less, smartphones (which it has a solid core to build on through its Chinese sales) and tablets must now also target the enterprise specifically and must be carefully coordinated with the PC and Enterprise teams.
We believe that Lenovo has done an excellent job of ferreting out what is important for the company to grow going forward. The question is: can it execute?
Given its substantial enterprise PC growth and its well-managed successes here, coupled with the Chinese market leverage it has for its mobile devices, we absolutely believe Lenovo can pull this off. Look for significant growth ahead of it this year.
TechZone360 Senior Editor
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