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Lessons from Lenovo's Motorola acquisition

Posted: 05 Feb 2014     Print Version  Bookmark and Share

Keywords:Lenovo  Motorola Mobility  Google  patent  consumer market 

Lenovo has recently acquired Motorola Mobility from Google for $2.9 billion. Given the state of the market, the deal presents a number of lessons that industry can learn from.

Manufacturing still matters

Volume is key. Apple knows this with its Foxconn relationship. Google has its relationship with Asus for the Nexus 7 tablet and the Nexus 5 phone, but Motorola could not tap into that relationship. The purchasing power from building PCs, notebooks and tablets that Asus, Foxconn, Samsung and Lenovo have given the manufacturer access to the pricing that is needed for the phone market. This is even more relevant with the move to larger screens on phablets. Under Google, Motorola could not access those volumes.

The consumer market is not enough for smartphones

Motorola historically is a consumer brand, and had done well in the consumer markets. But the Lenovo deal is demonstrating the increasing importance of the enterprise market. Bring Your Own Device (BYOD) is a key driver for smartphones and one that Motorola has not been able to tap in recent years. Lenovo's enterprise experience and customers will play well here.

Watch out Nest

What the Lenovo deal says is that Google does not have, or want, the manufacturing volume to compete in the consumer market. This has implications for its recent deal to acquire the Nest intelligent home developer. Expect Google to build up its knowledge about how people use Nest and similar devices, and stimulate the smart home market, which is still nascent, with innovative devices. Nest will then be sold to a consumer company with the manufacturing muscle to make it fly, while Google keeps a core group of highly talented design engineers.

Partners are as important as patents

Google spent nearly $9 billion of the patents it acquired with Motorola Mobility and is keeping them to protect the Android ecosystem. With the heritage of the laptop businesses of TI and IBM, Lenovo has a bank of patents that will also be useful for Google to access, as well as licensing the Motorola patents. This also brings a large electronics company into the Android camp, strengthening Google's position. This also allows Google to stop competing with some of its largest customers. Selling Motorola helps strengthen Google's partnership with Samsung on Android.

Google is an information company

Google is not a hardware company, even though it develops hardware and buys hardware companies. Its revenues come from information about customers, through search, through ads, through social networks, through operating systems, through apps and through the devices in the home and office. The Nexus 5 and 7 are necessary to drive data and demonstrate what's possible, and Nest is exactly the same. Nest will be built up and sold on, taking Android deeper into the home to reveal even more information for Google.

- Nick Flaherty
  EE Times Europe

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