PC giant Lenovo is buying Google’s Motorola handset unit for $2.91 billion, the second major acquisition the Chinese company has made within the past week.
The deal for the Motorola Mobility business announced late Wednesday would give Lenovo entree into the U.S. smartphone market with brand names such as the Moto X and Moto G. Motorola is the third-largest maker of Android phones in the U.S. as well as the overall No. 3 smartphone company in Latin America.
Lenovo, which is based in China but has a headquarters in Morrisville, has significantly outpaced its PC competitors and last year emerged as the No. 1 PC company worldwide. But slack consumer demand has led it to diversify into other devices. It’s been selling smartphones and smart TVs in China and other markets, but hasn’t launched those products in the U.S. and Europe.
Lenovo CEO Yang Yuanqing said during a conference call that acquiring “one of the legendary brands” in technology will position Lenovo to “challenge the leaders of the smartphone market over the next few years.”
“Now we are not only the No. 1 PC maker in the world, but with this agreement, we will become a much stronger No. 3 smartphone company as well,” Yang said.
In the latest quarter, Lenovo ranked fourth in worldwide smartphone shipments behind Samsung, Apple and Huawei, according to research firm IDC. Last year, Lenovo’s smartphone shipments rose more than any of the top smartphone makers.
Motorola Mobility has been losing money ever since Internet behemoth Google bought the business in 2012. Yang said that Lenovo’s manufacturing capabilities, operating efficiencies and faster product development cycle would enable Lenovo to turn the business around and make it a money-maker.
“I’m confident that when we combine the strengths of Motorola and Lenovo, we will have a successful combination,” Yang said.
Yang, who noted that his first cellphone was a Motorola phone, praised Motorola’s engineering and products and its relationships with retailers and more than 50 carriers around the world.
“These are essential to building a strong global smartphone business, especially in mature markets,” he said. “Smartphones (are) a key pillar to our future growth.”
Nearly 3,500 Motorola employees in 33 countries will join Lenovo when the deal is completed, including Dennis Woodside, CEO of Motorola Mobility, and his senior management team.
“That will help to transition and grow the business going further,” said Wong Waiming, Lenovo’s chief financial officer.
Last week Lenovo, the world’s largest PC maker, agreed to pay $2.3 billion to acquire a line of servers from IBM, a deal that will nearly double the company’s presence in North Carolina when it is completed. Today Lenovo has about 2,200 employees in Morrisville and 300 at a manufacturing facility in Guilford County.
Lenovo has shown that it can take iconic American brands and turbocharge them. It first entered the U.S. PC market – and became a major Triangle employer – in 2005 when it acquired IBM’s PC business, which included the Think brand.
Google will retain ownership of the vast majority of Motorola Mobility’s patent portfolio, with Lenovo licensing the rights to those patents and other intellectual property. Still, Lenovo will gain more than 2,000 patents in the deal.
Lenovo has agreed to pay Google $660 million in cash and stock valued at $750 million, plus a three-year, $1.5 billion promissory note.
“As you know, yesterday President Obama said in his most recent State of the Union speech that right now is the best time to invest in America,” Yang said. “Well, we heard him and are doing exactly just that.”