Co-operation with Google key for Lenovo's Motorola deal

PUBLISHED : Saturday, 08 February, 2014, 5:12am
UPDATED : Saturday, 08 February, 2014, 10:39am

While investors look warily at Lenovo's bold acquisition of Motorola Mobility, the computer giant sees the beginning of a beautiful friendship with Google, which will become a high-profile shareholder when the deal is completed.

Beyond getting the Motorola brand, the smartphone maker's engineering expertise and access to more markets worldwide, Lenovo relished "the opportunity for future co-operation with Google", Wong Wai-ming, the chief financial officer at Lenovo, said in a recent interview.

Lenovo, the world's largest supplier of personal computers, agreed last month to acquire Google's loss-making Motorola operation for US$2.91 billion, payable in cash, shares and a three-year promissory note. The deal pushes up Lenovo as the world's third-largest supplier of smartphones.

Wong said Google, which will own shares in Lenovo worth US$750 million at the close of the transaction, was expected to "share their view of Lenovo's business" as part of the strategic tie-up.

"This acquisition is much more than getting scale [in the smartphone market]," he said.

Internet search kingpin Google, meanwhile, would gain equity in a company with a leading position in personal computers, smartphones and media tablets. Lenovo was the world's No4 tablet brand in the third quarter of last year.

Frank Gillett, a vice-president at Forrester Research, summed up Lenovo's product offering as "a vital trifecta that no other global manufacturer has, besides Apple".

Samsung Electronics, which is the top maker of smartphones and tablets that run on Google's Android operating system, does not have that distinction.

Ezra Gottheil, a principal analyst at Technology Business Research, said "Lenovo's tolerance of low margins and broad focus on all market segments will give it advantages" as it took on global smartphone leaders Samsung and Apple.

Shares in Lenovo edged 1.32 per cent higher yesterday to close at HK$8.42. It was a welcome improvement from last week, when the stock slipped 16.4 per cent - its biggest decline since January 2009 - after being downgraded by several brokerages, which saw a negative impact on Lenovo's earnings from the Motorola deal.