Tempting though it might be to look at Google’s decision to sell its Motorola business to Lenovo for $2.9 billion as an admission that its original $12.5 billion purchase of the company in 2011 was a mistake, it would be utterly wrong to do so. Far from being a failure, the acquisition has been an outstanding success. Not only did it allow Google to get its hands on a 17,000 patent portfolio at a time of dire need, but inherited cash reserves and deferred tax assets, as well as subsequent divestments, mean that the company’s net spend on Moto was substantially less than the headline figure. All that before we remember that even after the sale to Lenovo, Google still has 15,000 of those Moto patents under its direct control.
When looking at yesterday’s news, it’s worth remembering where Google was at the time it made its offer to buy Motorola back in the summer of 2011. It had just missed out on the Nortel patents after a protracted bidding process and found itself with a woefully small portfolio of rights as its Android platform was coming under sustained patent attack from multiple companies. It was a platform that had proved popular with a number of manufacturers, but many of these were becoming profoundly worried that they were extremely vulnerable litigation targets.
As hard as it may be to believe now, there was no certainty back then that the manufacturers would continue to commit fully to Android. The investments Google had made in building it, the bet the company had made on its future, were under threat. Google’s partners needed reassurances. The Motorola purchase told them all they needed to know: Google was serious and was ready to stand by them. As a result, and despite concerns about possible competition from Moto, they stuck with Android. Given how the platform has thrived since then and is now beginning to generate a serious return, $12.5 billion was money well spent to convey the message Google’s partners needed to hear.
But, of course, as Google has been able to recoup a good chunk of its initial outlay, we are not really talking about $12.5 billion at all. Indeed, it looks as if its net spend has actually been less than it would have been had its, rumoured, final $4.1 billion bid for the Nortel patents been successful. Essentially, therefore, for next to nothing, Google managed to secure the future of Android and get its hands on a huge patent portfolio that it can use to shield the platform from attacks, as well as to build on to create new products and partnerships, such as the one recently signed with Samsung. That may be the result of a heady mix of serendipity and design, but it is a matter of fact. And it may make the Motorola purchase one of the deals of the century.
Licensing, IP litigation, Patents, IP business, IP valuation