Lenovo to buy Motorola unit to boost smartphone business

The Flextronics plant that will be building the new Motorola smartphone "Moto X" is pictured in Fort Worth, Texas in this file photo taken September 10, 2013. Lenovo will buy Motorola Mobility from Google for 2.9 billion U.S. dollars, in a bid to boost its smartphone business in the Americas and access thousands of patents, the Chinese company announced on Thursday. (File Photo)

Lenovo will buy Motorola Mobility from Google for 2.9 billion U.S. dollars, in a bid to boost its smartphone business in the Americas and western Europe and access thousands of patents, the Chinese company announced on Thursday.

Under the deal, Lenovo will pay 1.41 billion U.S. dollars in cash and its ordinary shares. The remaining 1.5 billion U.S. dollars will be paid over three years.

"With the deal, we expect to become the No. 3 smartphone manufacturer in the fast-growing global market," said Yang Yuanqing, Lenovo's chairman and CEO, adding that the company has set the goal of selling 100 million smartphones in 2015.

The acquisition will enable Lenovo to enter key markets and receive over 2,000 patent assets and the iconic Motorola Mobility brand, said Yang.

Google's CEO Larry Page said that he believes Lenovo has "the expertise and track record to scale Motorola into a major player within the Android ecosystem."

Dennis Woodside, CEO of Motorola Mobility, said his company has tremendous momentum right now with the recent launches of new products, and that Lenovo's hardware expertise and global reach will only help to accelerate this.

Shares of Google at NASDAQ gained 2.18 percent to 1,131 dollars in after-hours trading. Shares of Lenovo Group went through choppy trading in Hong Kong to close down 8.2 percent during the half-day trading on the eve of Chinese Lunar New Year.

The deal is still subject to regulatory review in the United States, but analysts say Lenovo's rising global profile and a number of cross-border deals in recent years will make it easier for the company to get the go-ahead from regulators in the United States.

Google's 12.5 billion U.S. dollar purchase of Motorola Mobility in 2012 was widely seen as the company's strategy to boost its patent portfolio in its legal battle with rival Apple.

Under Google, the smartphone maker rolled out its Moto X and Moto G Android smartphone, but still failed to swing back to profit. Motorola Mobility reported a loss of 249 million dollars in the third quarter of 2013, up 24 percent from the same period a year ago.

Yang said Lenovo is confident of successfully embracing and strengthening great brands -- as it did with IBM's Think brand. "Our companies will not only maintain current momentum in the market, but also build a strong foundation for the future," he said.

The deal came a week after Lenovo said it would buy IBM's X86 server business, a low-end unit, for 2.3 billion U.S. dollars. Following its purchase of IBM's personal computer business in 2005, Lenovo has conducted a number of international mergers and acquisitions in recent years to enhance its global presence.

Lenovo became the world's largest PC maker in 2013 and is ramping up efforts to grow its mobile devices business. So far the Beijing-based company is the second biggest smartphone seller in China and comes in fourth in global smartphone sales, after Samsung, Apple and Huawei.

Of Lenovo's three major business lines -- PC, server and mobile devices -- both PC and server businesses have been successfully expanded on a global scale through a number of mergers and acquisitions. The purchase of Motorola Mobility marks an important milestone in Lenovo's long-term endeavor to enter the coveted U.S. and Latin America markets, experts say.

"Through this deal Lenovo will have a truly global market for its mobile devices, establishing a foothold in markets where the company has yet to have a presence," said Kitty Fok, managing director of IDC China.

Despite Motorola's dwindling market share in the smartphone business, estimated to be 1.1 percent of global smartphone shipment from the fourth quarter in 2012 to the third quarter in 2013, its close ties with major U.S. telecom operators such as AT&T, Verizon, Sprint and T-Mobile likely means bright prospects for Lenovo to expand in the United States, analysts say.