SAN FRANCISCO — Google is selling Motorola's smartphone business to Lenovo for $2.9 billion, a price that leaves little doubt that Google's biggest acquisition turned out to be an expensive mistake.
The deal announced Wednesday will rid Google Inc. of a financial headache that has plagued the Internet company since buying Motorola Mobility for $12.4 billion in 2012. Motorola has lost nearly $2 billion since Google took over.
Google previously recovered some of the money it spent on Motorola by selling set-top operations last year to Arris Group Inc. for $2.35 billion.
And Google is holding on to most of Motorola's more than 20,000 mobile patents, providing Google with legal protection for its widely used Android software for smartphones and tablet computers.
The Motorola patents were valued at $5.5 billion at the time Google took over, according to regulatory filings.
Factoring all that, there's a gap of roughly $1.65 billion between what Google paid for Motorola and what Google is getting from its sales to Arris and Lenovo, plus the original value of the patents.
It's also unclear if Google will have to absorb a charge to account for its apparent miscalculation of Motorola Mobility's value. The Mountain View, Calif., company may address the issue Thursday when it announces its fourth-quarter earnings after the market closes.
Most investors viewed Motorola as an unnecessary drain on Google's profit, a perspective reflected by Wall Street's reaction to the sale. Google's stock gained $28.08, or 2.5 percent, to $1,135 in extended trading.
Motorola Mobility had its last big hit with the Razr flip phone, which came out in 2004. Its product line became outmoded after Apple Inc. released the iPhone in 2007.
While Google is backpedaling, Lenovo Group Ltd. is gearing up for a major expansion.
Lenovo already is among the smartphone leaders in its home country of China, but it has been looking for ways to expand its presence in other markets.
“We will be going from an emerging-market player to a worldwide player in smartphones,” Lenovo CEO Yang Yuanqing said.
This marks Lenovo's second high-profile deal this month. The company announced plans last week to buy a major piece of IBM Corp.'s computer server business for $2.3 billion.
We will be going from an emerging-market player to a worldwide player in smartphones.”