If anyone had told me six months, 12 months, 18 months back that everyone involved in or passionate for mobile technology would be raving about Lenovo today, I’d have probably called them crazy. Drunk. High. Stupid.
I mean, who is Lenovo after all? The global PC market’s silver medalists two years in a row and the new leaders starting in the second quarter of 2013, sure, but they don’t know the first thing about phones, smartphones or Android. Or so it seemed.
The deal of the century: context and background
Basically, since HP and Dell’s efforts to break into the mainstream mobile décor failed so miserably, why should we have expected any better from Lenovo? Well, I’ll tell you why. It has a little to do with their headquarters’ location and a lot with the Chinese government’s involvement in the company’s management.
Technically, Lenovo is a private enterprise, but on the down low, word has it domestic political authorities control it. So what does that have to do with anything? Let’s just say, if the world’s second-largest economy by nominal total GDP and the number one exporter and importer of goods wants to take charge of a certain market bad enough, it’ll find ways.
Lenovo’s quest for world domination
First try, a BlackBerry acquisition. Cut off by the Canadian government, yet key for Lenovo’s decision to ultimately go after an Android juggernaut. Or, in Motorola’s case, a former juggernaut yearning for the fame, respect and financial prosperity of time passed.
Shocking move? Only if you underestimated Lenovo based on their mobile track record so far. Which, by the by, is not as bad as people think. Granted, folks on the Western hemisphere are unlikely to have ever seen, touched or held a smaller Lenovo gizmo than, say, a ThinkPad laptop, but the OEM’s Asian sales helped it reach global number four in Q4 2013.
Ahead of, you guessed it, Motorola and behind Samsung, Apple and Huawei. Added together, Lenovo and Moto’s shares take the two-headed enterprise to the last spot on the podium, albeit still well behind the two frontrunners.
Need me to spell it out for you? Fine. Regardless of how ambitious or apt for success Lenovo’s execs and employees might be, in spite of their computer expertise (which make no mistake, counts when smartphones are less phones and more tiny PCs), and how they can probably already build better hardware than Moto at lower costs, they’d have never made it stateside sans the backing of a brand Westerners recognize and somewhat trust.
Of course, Motorola isn’t the ideal “partner”. Its reputation has taken hit after hit in recent years, until Google bought it and in part turned things around, thanks to the unsung hero that is the Moto X and the outlandishly cheap, ridiculously solid G.
So you see, when Larry Page started to ask around about potential buyers, Lenovo couldn’t have missed the opportunity. Especially as the purchase costs are ridiculously low compared with the prospects. $2.91 billion, of which just $660 million cash upfront? Frigging Nest was pricier, at $3.2 billion.
Sounds a little like Google got the short end of the stick there, huh? After all, the search giant secured Motorola for a whopping $12.5B in 2011, plus between then and now, Moto’s revenues accounted for extra losses of hundreds of millions.
Now I’m not great at math, but overall Big G lost roughly… a gazillion smackeroos. Or did it? Well, not quite. First of all, the point of Google’s initial purchase was not to build exceptional hardware with Moto’s aid. It was to seize a cluster of patents, which were essential for avoiding lawsuits like the ones Apple and Samsung continue to be involved in.
Of those patents, Lenovo will only get a small part. Presumably, the less valuable papers. That’s one. Also, the Advanced Technology group and Project Ara are staying in Mountain View. Not sure exactly how much they’re worth, but they must benefit Larry Page & co. somehow.
Let’s keep in mind Google unloaded Moto’s set-top box unit a while ago too, for north of $2 billion. So all in all, the losses are not so extreme. But more than the financial aspect, the Samsung factor was likely crucial in the decision to go through with the deal now, almost at all costs.
Wait, why was Samsung a factor again? It’s simple, really. When Google began to directly invest in hardware manufacturing through Motorola, several third-party Android device makers, including Samsung, rebelled.
How can we expect Google to treat us all the same software support-wise when they have a skin in the hardware game, they asked. Due to its power as the world’s undisputed heavyweight smartphone champ, Samsung was however the only player capable of getting Mountain View to listen.
And they did, putting a lot of pressure on Android with rumored Tizen development. At the end of the day, Google couldn’t risk losing its one big client, so instead, it sacrificed Motorola. Was that the plan all along?
Maybe, as again, Moto’s appeal lied in its patent portfolio first and foremost. But it’s not entirely out of the question for Page, Brin and the others to have actually considered following up themselves on the Moto X and G’s somewhat unexpected success.
As for Samsung, the Tizen nonsense is almost definitely a thing of the past, so fingers crossed for the love affair with Google to last and result in TouchWiz’s death. Google Play Edition Samsung Galaxies for the win!