Market Overview

Google's Loss On Motorola Isn't As Bad As It Seems...Here's Why

Related LNVGY
Digitimes Reports Intel to Achieve 80% of its Goal of 40M Tablet-AP Shipments in 2014
Benzinga's Top #PreMarket Gainers

After purchasing Motorola for $12.5 billion in 2012, Google (NASDAQ: GOOG) announced Wednesday it will sell the division for $2.91 billion to Lenovo (OTC: LNVGY).

Despite what appears to be a $9.5 billion loss, Michael J. De La Merced of New York Time's DealBook wrote that Google “did not do so bad.”

How is this possible? Using some simple accounting techniques, Google “technically” paid much less than $12.5 billion for Motorola.

When Motorola was initially acquired it had $3 billion in cash on hand in addition to $1 billion in tax credits, technically lowering the original deal to $8.5 billion.

Google later on sold Motorola's set-top box business to Arris for around $2.4 billion. As this was cash related to the initial Motorola acquisition, this lowers the effective acquisition price to around $6.1 billion.

Effectively, Google paid $6.1 billion for Motorola and has sold the division for $2.9 billion, translating to a $3.2 billion loss, which doesn't sound as bad the originally $9.5 billion loss that many investors fixated on.

But wait, there's more.

In a regulatory filing in 2012, Google valued its Motorola's overall “patents and developed technology” at about $5.5 billion. Under the terms of the deal announced on Wednesday, Google will retain ownership of the majority of the patents.

Once all this is said and done, did Google really commit what Time described as a “gargantuan mistake only Google could afford to make?”

Posted-In: Deal Book Google Lenovo Michael J. De La MercedNews M&A Tech Media Best of Benzinga

 

Most Popular

Related Articles (GOOG + LNVGY)

Around the Web, We're Loving...

Partner Network

Get Benzinga's News Delivered Free