When Google bought Motorola in 2011 for $12.5B and then sold it in 2014 for about $3B, many people viewed it as a huge loss. Despite Motorola being used as leverage against Samsung and the benefits from that, Motorola also proved to be much more of a profit than is seen on the surface.
At face value, the purchase of Motorola is seen as about a $10B loss. When a closer look is taken, however, it can be seen that Google had much more up its sleeve. According to Gordon Kelly, "What it misses are the $3.2bn Motorola had in cash, $2.4bn saved in deferred tax assets and two separate Motorola unit sales totalling $2.5bn in 2013. Factor in Lenovo’s purchase against roughly $2bn of Motorola losses during Google’s ownership and Google has still only paid $3bn for what it retained."
Fortunately for Google, this were tens of thousands of Motorola patents that totaled in value at about $5.5 billion. These patents will serve Google for years in lawsuits against mobile phone manufacturers. In addition to this value is the intangible value of now owning Motorola's research and facilities. These facilities will serve to promote Google hardware, which is what the company is lacking. Google will now become less dependent on other companies to use their operating system and the autonomy that Google now has is priceless.
This purchase goes to show that there is much more to purchasing a company that the purchase price and the sales price. Motorola had many assets that Google could claim, which made the purchase of Motorola a net gain in the end.
Great, informative blog post, but I disagree with some of your opinions. I agree that looking solely at the $12 billion purchase price can be misleading; Google did get a lot in exchange for their purchase (mainly in the form of patents). But unfortunately, they did a poor job of evaluating the value of Motorola before they purchased the company (this could partly be due to the fact that Apple had already made a massive patent portfolio investment through the purchase of Nortel's patents via the Rockstar Consortium--Google had to quickly respond with a purchase of its own to defend itself and Android in court). Many of the patents that Google purchase failed to hold up in court when they attempted to block the sales of iPhones. Furthermore, sales of Motorola's handsets missed targets, while cannibalizing the sales of Google's own line of smartphones, Nexus, and other devices running Android. It's important to note that hindsight bias plays a major role in making this evaluation. Google did not know that Motorola's patents would not know in court and it's unlikely they could have accurately predicted Motorola's inability to sell handsets (some argue that this actually worked in Google's favor; by selling Motorola's devices at rock bottom prices, they were able to attract first-time smartphone owners into the Android ecosystem).
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