Earlier this evening Google announced the sale of Motorola Mobility to hardware manufacturer Lenovo for a deal valued at just below $3 billion. Given my fondness for the Moto X and Moto G, two of the best ergonomically executed handsets in the Android space from my perspective, I had a bunch of thoughts about this deal that I wanted to get down in writing.

I'll start off with a bit of praise for Motorola. The transformation of the company post-Google-acquisition has been nothing short of awesome. The in-hand feel of the Moto X and Moto G remain unparalleled by any competing Android device in my opinion. I absolutely understand that's personal preference, but the next three points aren't. With the Moto X, Motorola bucked the trend of higher CPU core counts (disregarding their driving-me-to-drink 8-core messaging for a moment) and instead opted for two high frequency CPU cores that ultimately delivered better thermally bound CPU performance than the quad-core alternative. Motorola also was the first Android vendor I came across to think of addressing the issue of random IO performance, in this case by deploying a NAND Flash aware file system (f2fs) on the Moto G and X. Finally, Motorola is one of very few Android OEMs that doesn't blatantly cheat in a whole host of terrible smartphone benchmarks. In short, I like the new Motorola. The good news is that I'm not sad to see the company go to Lenovo.

Lenovo doesn't have a history of ruining brands. Its acquisition of IBM's PC business seems to have done well, and I can only assume that Lenovo has the same intents with Motorola. Acquisitions that strengthen the position of the acquirer are (understandably) sensible ones, and here we're talking about two relatively small players in the overall smartphone industry combining with hopes of increasing market (and revenue) share. With both Motorola and Lenovo controlling single digit percentages of the smartphone market (1.3% and 5.1%, respectively, according to Gartner) it's clear that neither party has a chance independently. Lenovo could leverage its position in China, while Motorola would hopefully be able to do the same in the US (although with a much steeper slope to climb). So far the deal makes sense, although it doesn't guarantee anywhere near instant success.

The basic fact is that it seems like it's difficult to turn a profit, even in the face of substantial revenue, in the smartphone space. LG and HTC have both struggled here, while Apple and Samsung do quite well. Apple aims squarely at the high end, while Samsung arrives at great profits through a combination of factors - not the least of which is its ability to act as both an integrator and supplier of technologies.

While odds against turning a substantial profit would point to this deal being a bad (or neutral) one, if there's a company that knows how to successfully compete in a low margin business it's Lenovo. In a world where being a PC OEM is hardly desirable, Lenovo seems to have done fairly well. Leveraging its presence in China as well as higher margins from its corporate business, Lenovo has been able to support and reinvent its consumer facing PC business. It's entirely possible (likely?) that Lenovo views it can repeat the same success in smartphones.

(Side note: if smartphones end up being low margin businesses for most companies, that potentially increases the reliance of smartphone vendors on reference designs from silicon vendors - drawing an interesting parallel to how things work in the PC space.)

Google's position in all of this is interesting. CEO Larry Page posted his thoughts on the sale to Google's official blog. I'd like to call out a couple of important quotes:

"...the smartphone market is super competitive, and to thrive it helps to be all-in when it comes to making mobile devices."

and

"As a side note, this does not signal a larger shift for our other hardware efforts. The dynamics and maturity of the wearable and home markets, for example, are very different from that of the mobile industry. "

The first point solidifies Google's position with regards to Android. It will be an OS and services provider, relying on its partners to build the hardware. Monetization comes from mobile search advertising, location based advertising and general mobile data mining. At a high level this is the Windows/PC ecosystem strategy, except instead of charging a ton for an OS license Google makes its money in these other ways. Note that there's an obvious implication for what happens to the Nexus line but we'll wait and see how that pans out.

I have to point out that although Microsoft was once a proponent of this approach, as of late it seems to have lost some faith (for good reason) in the PC OEM ecosystem and chose to throw its hat in the ring with Surface. It took PCs a very long time to get to this point, and I suspect if the same end result happens to the Android ecosystem it will take a while before it gets there either. Following the Microsoft model makes a lot of sense from the perspective of growing marketshare. Given how Google primarily monetizes Android today, being in the software/services business and leaving hardware up to its partners is absolutely the right move for the company. If we've learned anything from watching the PC evolve however, it's that OEMs participating in a low margin business tend to prioritize profits first and user experience second. My hope for a Google-owned Motorola was a device vendor that was independent of that mess, but as I just mentioned I don't see this being a problem for some time to come.

Larry's side note above also makes sense, it tells us a lot about Google's willinginess to play in the hardware space. In a sense, Google won't be a fast follower but it will gladly reap the rewards of a being a first mover in any industry. Focus is extremely important for the success of any company, big or small, and in this case Google is doing right by its shareholders and being focused. Google is absolutely an early mover in the wearables space and with its acquisition of Nest you can say the same thing for its role in the connected home. As I wrote about the Galaxy Gear not too long ago, with those in the smartphone space addicted to exponential growth, a maturing market drives almost everyone to look for the next big thing. There are a handful of these markets that seem feasible in the near term: automotive tech, connected home and wearable computing (+ maybe a category for things like the Oculus Rift).

Android is turning out to be the mid-90s Windows of the mobile space, while Google wants Glass and Nest to be the iPhones of wearables and the connected home. I can definitely see the former, and I think Nest absolutely puts Google on the right right for the latter, I am uncertain about how Glass plays out in the wearables space over time. The wearables market is still very much in its infancy.

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  • darwinosx - Thursday, January 30, 2014 - link

    This has zero to do with Samsung. Google has been trying to get Motorola in shape for someone to buy them since day one. Reply
  • Impulses - Wednesday, January 29, 2014 - link

    Hmm, not sure I have any strong feelings against this a long as it pans out at least as well as the IBM PC acquisition... I see two short term positives for sure:

    1) it solves the whole dilemma of Google competing against it's OEMs (it would never end otherwise), we'll see how Moto does with updates now tho...

    2) $5 says the next Nexus is a Motonovo device, which could be really interesting IMO... They're basically next in line anyway (HTC had one, and the G1, Samsung had two and so did LG), unless they go back to HTC or Sony. A Moto Nexus could never happen as long as Moto was Google's tho, too many people would cry about it regardless of how inconsequential.
    Reply
  • Krysto - Thursday, January 30, 2014 - link

    I'm still hoping for a Sony Nexus one last time (if Google decides to kill Nexus brand after that).

    I think it would be too early for a Lenovo/Motorola Nexus, since it would basically have to be Motorola anyway. If they would've planned for a Motorola Nexus, it would've happened already since last year. So it would be all-Motorola, and won't have anything to do with Lenovo.
    Reply
  • dragonsqrrl - Wednesday, January 29, 2014 - link

    What do you think this means in terms of Android updates for the Moto X and Moto G? I'm wondering if this could have a negative impact on the swift updates we've seen thus far. Reply
  • darwinosx - Thursday, January 30, 2014 - link

    This means you will see few to none. Reply
  • nevertell - Wednesday, January 29, 2014 - link

    No, Lenovo's acquisition of IBM's Laptop department hasn't gone well, at least for the consumers. Comparing X60 to X200 to X230/X240 shows a trend of decreasing quality, decreasing costs, removing features.

    Also, since China is as eager to spy on us as the States, this could mean that the next Motorola phones will not only be backdoored by the U.S. but also Chine.
    Reply
  • shadowdude777 - Wednesday, January 29, 2014 - link

    My thoughts exactly. I came here to post that I used to own a T420. I bought a ThinkPad Yoga and returned it because the build quality was awful. I've played with a friend's T440 and the build quality is also similarly disgusting. Lenovo HAS ruined the ThinkPad brand. They've turned it into just another cheap, low-margin, cost-cutting laptop. ThinkPads used to be about quality without compromise. Reply
  • Bashfu11 - Thursday, January 30, 2014 - link

    The fact remains however that you can still spend the money and get a high end, well built Thinkpad notebook, with a carbon body solid as a rock. In addition to that, when I compare Lenovo Thinkpad notebooks to compatible HP G series, Acer E-Series and low end ASUS K series, well Lenovo takes the cake by a wide margin in my personal opinion. They have widened the brand, yes.... but margins are not great and competition is abundant in the OEM space. I still think the notebooks are top knotch, just not at the bottom of the barrel price points. Still, those cheap units are great compared to the cheapos that other companies make. Reply
  • Tosis - Thursday, January 30, 2014 - link

    You're comparing the wrong products to what Lenovo's marketing the ThinkPad too. Relatively speaking, IBM and early Lenovo ThinkPads have much better design and build quality. Also, ThinkPads are competing with HP EliteBooks and Dell Precisions and nothing from ASUS, Acer, etc. The current ThinkPad is no longer a business notebook. It is a consumer notebook.

    I wonder how that would translate to Motorola phones. Will the quality of Motorola phones gradually decrease like how the ThinkPad did or will they get better? I hope they get better.
    Reply
  • zzzaac - Wednesday, January 29, 2014 - link

    Ironic, since, that USA seems to be eager to spy on her allies as well Reply

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