Facebook acquires virtual reality company Oculus VR for $2 billion

Part 4
Facebook acquires virtual reality company Oculus VR for $2 billion (Part 4 of 5)

Key tech deals: Facebook buys WhatsApp, Google sells Motorola

Google bought Motorola in 2012 and sold it in January 2014

In the last article of this series, we discussed the high-valuation deal-making trend in the tech sector. We briefly discussed the high-value acquisitions made by Facebook (FB), Google (GOOG), and Microsoft (MSFT) and what makes these companies buy other companies. Here, we’ll discuss the motivation behind Google’s acquisition of Motorola. Google bought Motorola Mobility for a valuation of $12.5 billion in 2012. However, recently, it sold Motorola to Lenovo (LNVGY) for a valuation of $2.9 billion.

Motorola Loss from OperationsEnlarge Graph

Why did Google buy Motorola in the first place?

The main motivation of Google buying Motorola Mobility in the first place was its huge trove of patents. The idea was that the patents would help the company with legal protection for its widely used Android software for smartphones and tablet computers against competitors such as Apple (AAPL), BlackBerry (BBRY), and Nokia (NOK). Google had always kept Motorola’s hardware business at arm’s length in order to avoid the risk of alienating other mobile device makers that rely on Android. The result was that Google’s Nexus-branded phones often stole the spotlight.

Why did Google sell Motorola to Lenovo?

Motorola was bleeding losses before Google bought Motorola, and it continued to lose money even after the acquisition. Motorola has lost nearly $2 billion since Google took over while trimming its workforce from 20,000 to 3,800. So the Motorola sale to Lenovo would help Google get rid of the financial headache that has plagued the company since the time it bought Motorola. The sale would also help Google focus its time and resources on the Android mobile operating system software and the new wave of smart devices. Moreover, Google will keep the majority of Motorola’s huge patent portfolio even after its sale to Lenovo. So the sale to Lenovo isn’t bad for Google.

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