Editorial by Andrew Kameka on Thursday January 30, 2014.
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Since Google announced that it would sell Motorola to Lenovo for $2.91, a paltry sum considering that the company paid $12.5 billion to acquire Motorola just two years ago, reports have popped up suggesting that the losses are not that bad because of the patents that Google gets to keep. Even with the patents, buying Motorola is still a big loss.
People were wrong to say that Google lost $10 billion dollars on the deal, but the New York Times may be simplifying damages by saying Google really lost roughly $3.2 billion. It's hard to get an exact figure of how much Google will end up losing because of ongoing expenses and accounting practices, but here's a general breakdown of Motorola's troubles under Google:
- $12.5 billion purchase price
- $1.37 billion in quarterly losses (excluding Q4 2013)
+ $4.00 billion in Motorola cash and tax credits at the time of purchase
+ $2.35 billion for sale of set-top division
+ $2.91 billion for sale to Lenovo
As of today, Google is roughly $4.61 billion dollars in the hole for Motorola. The New York Times says that the company valued its patent library at $5.5 billion dollars and Google is retaining that portfolio, so things are better than they seem. However, Google has lost practically every high-profile patent case related to Motorola disputes with competitors, so the valuation of its IP may be a little high. Patents have financial value only if you can win disputes and collect royalties; perhaps those patents prove valuable in the long-term when royalties for Motorola IP continue to be paid.
We won't know the full costs of the Motorola transaction for quite some time, especially because Motorola will still be on Google's books and probably bleeding cash until the Lenovo sale is finalized, but it's clear that the transaction was a financial disappointment for Google. And that's not to mention the headaches the deal created with Android partners and regulators. Perhaps Google is saving itself from further aggravation and losses of time and money by accepting defeat now rather than later.
Andrew is based in Miami, Florida.