IE Focus | By Enrique Dans, Professor at IE Business School

Google bought Motorola for 12.5 billion dollars, invested in it to make it competitive and then sold it for  2.91 million, keeping its patent portfolio. A tale of success or failure?

Google has sold its Motorola mobile phone business to Lenovo for 2.91 billion dollars, thereby demonstrating that hardware, although it plays a crucial role in strategy development, is seen by the company as being a factor that is somewhere between marginal and accidental.

Google’s acquisition of Motorola was one of the biggest surprises of the summer of 2011. Google paid 12.5 billion for a legendary manufacturer that had come down in the world, but which had a massive portfolio of patents that could be fundamental in navigating the complex scenario of litigations the company was thinking of launching at the time.

Moreover, the acquisition posed a problem. If Google’s strategy with Android was to make itself attractive to all  Smartphone producers, how would said producers feel about the fact that the company that was selling them something as vital as an operating system would also be competing against them through its own newly acquired handset manufacturer? Becoming a mobile phone manufacturer was a dangerously incoherent move by Google.In the end Google bought Motorola for 12.5 billion dollars, and then invested to make the company competitive – producing some very promising models, namely Moto X and Moto G,  and has now sold it for  2.91 billion, having retained its patent portfolio. A bad deal?

It turns out that Google’s hardware strategy is incredibly efficient: with a system that has an open license that is free of charge, it has managed to ensure that its system is massively dominant in the smartphone market, gaining market share progressively in the tablets sector, and positioning itself aggressively in the PC market through Chromebook.

Using hardware as a means to an end. Serving as the soul of machines that manufacture others. Microsoft dominated the technology scene for many years, thanks to its operating system. Google aims to follow the same path.

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