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Google to own $750 million Lenovo stake after Motorola deal closes: HK exchange (reuters.com)
130 points by alexeichemenda on Feb 7, 2014 | hide | past | web | favorite | 37 comments

"Google paid $750 million for a 5.94% stake in Lenovo Group on Jan. 30, according to a disclosure on the Hong Kong stock exchange. The purchase was made on the same day after Google announced that it had agreed to sell the Motorola brand to Lenovo for $2.91 billion, but will keep most of the handset maker’s patents.

The purchase of shares might be part of the deal, in which Lenovo agreed to pay a total of $2.91 billion, with $750 million in Lenovo ordinary shares, $660 million comprised of U.S. cash, and the remaining $1.5 billion in a three-year promissory note.

According to one of our sources, Google had wanted to sell Motorola for some time before striking the agreement with Lenovo because the handset brand has yet to live up to its purchase price, but had to hold off on selling the division for tax reasons. On the other hand, buying Motorola helps Lenovo build out its cell phone business. There were rumors in October that it had submitted a bid for BlackBerry, but was turned down."

I'm curious, why this isn't insider trading?

Edit: I misread the post, they did buy it after the announcement which means it's public knowledge

Because of this: "The purchase was made on the same day after Google announced that it had agreed to sell the Motorola brand to Lenovo for $2.91 billion"

The purchase was made after the announcement. Furthermore, it was part of the Motorola transaction itself, and Google didn't exactly gain anything in the short term (Lenovo shares tanked in the days following the transaction).

BECAUSE it wasn't a "purchase" this was a very poorly researched article.

No, Google Didn't Just Buy $750 Million Worth of Lenovo Shares: http://on.recode.net/1eDFe17 via @InaFried

"Reporting showed that, in fact, Lenovo was merely disclosing what Google might own, should the deal go through"

It's not clear if these are options or contingent obligations. If the latter, the original story may be closer to the truth than this "clarification". Either way, its news that was non-obvious from earlier announcements.

Here's another article, since the linked one seems to be down: http://www.reuters.com/article/2014/02/07/us-google-lenovo-i...

Thanks, I've changed the link now.

Apple, recently Microsoft and now Google are either making or stake holders in PC manufacturing. So much for post-PC era.

Well Lenovo acquired Motorola off of Google, so Lenovo is technically not just in the PC manufacturing game anymore.

Lenovo had a thriving cell phone business already - but it served mainly Asia. Motorola gives them instant access to the NA market...

Taking what some CEO said as prognostication and not marketing talk is asinine. We were never headed for a "post-PC era". Tablet sales are slowing. Handhelds are were it's at. Regardless, desktops/laptops have and will (for the foreseeable future) have a very important place in consumer and especially business markets.

Well, less powerful toylike computing devices eventually grow up. I don't know what the transition looks like. Perhaps it will be via phablets. Or it might be a popular iPad accessory or a new kind of dock that got funded through kickstarter. Maybe it is a wireless display and a Bluetooth keyboard combo. Maybe it is a personal shrunk down smart tv that is easily paired with a phone.

The point is eventually they are sufficiently powerful and there is sufficient cloud computing infrastructure around for these device to offload work to. My parents know of no email clients. They have only encountered web mail, and in terms of convenience, it is absolutely great.

What stakes do Microsoft and Apple own in PC manufacturing?

Well for Apple it would probably be their own PC business. maybe they sold that when I wasn't paying attention.

I thought he was implying they had a stake in another non-Mac business. Mentioning Apple otherwise seems odd, seeing as they predate all the other players in the PC space.

Microsoft put up $2 billion on a note for the Dell privatization deal.

Not ownership of course, but a serious bit of dough at stake non-the-less.


Microsoft... like the Surface. Ring any bell?

Tbh I've never seen a Surface or bothered to look them up. I had assumed these were just branded tablets manufactured by third parties. Looking now, I still don't see why MS are bothering with them exactly, but the consensus seems to be it's only a way to try and bootstrap the Windows tablet market.

i5 + 4G RAM + 64G SSD = Excel, ssh, ftp, sublimetext, IDEs, full blown email program, virtual machines. Docking station for easy keyboard and mouse support + multiple monitors.

Use the pen to annotate pdfs, draw flowcharts, make designs, take notes.

Read flipboard, kindle on your lap.

It is a very good proposition for technical savvy business people. It's not as good as a corresponding laptop(better internals, better keyboard, better monitor) or a corresponding tablet (better design, dimentions, weight, app selection). But it is very well built, has decent battery life, truly portable, slick looking and powerful. If you are not concerned with your friends' opinion on it and you NEED the functionality and convenience of only 1 device, the surface pro 2 is a very good choice. And I imagine it will only get better. I don't use the cover tho. Very expensive without providing much convenience. If you need a keyboard for a quick email or smth like that, the onscreen will do its job like in another tablets and if you are committed to work, it will not suffice.

Grossly misleading title.

The title on Reuters is "Google to own $750 million Lenovo stake after Motorola deal closes: HK exchange", which is what it is.

They have changed the title a couple of times, it was not this title when reuters initially published the article.

Well, then, Goog, tell them to fix what they've been doing to their Thinkpad line. Thanks.

I'm genuinely confused about large companies constantly "reinvesting" their profits. I understand that a case can often be made for this or that strategic investment and that this is part of complicated maneuvering, paying in stock and such. I just don't understand the value (from a shareholders perspective) of owning share in Google that owns shares in some other company.

That aside, why does Google need to own stock in companies? Why not return money to investors and let them buy whatever stock they want.

It may have been the case that Lenovo could not afford to pay 3B in cash over the next three years.

Using their own stock helps them compensate Google for how much they feel Mobility is worth without putting themselves in a tough liquidity position etc.

I get that there are considerations like this. But in that case, would it mean that Google should gradually sell off this stock?

Large corporations hold on to all sorts of assets as investments. This can range from stocks and bonds to real estate or intellectual property. This is very common.

Tangentially related to this transaction you may or may not be aware that pretty much any company that funds its own insurance (most large companies) are required by law to hold investments that will help carry them over for any insurance claims. So there is some fund they hold that has stocks, bonds, etc. set aside so that they are covered for insurance claims. The same is true of pension funds.

Only if they see it as a bad investment or they need cash. Otherwise, it's probably fine to leave it as is and defer the taxes.

[EDIT] Oh, and they have a 5% stake in lenovo, which should benefit android and chromeos (and maybe keep MS in check).

In part because Google may wish to do something that required that money at some point in the future (for instance an acquisition or purchase of a chunk of patents to think of just two multi-billion dollar expenditures they've made in the relatively recent past).

Giving money back to shareholders is relatively easy, raising it from them if you need it for something is more involved.

And if you're going to hang on to it in some relatively liquid form, you might want to try and get a better return than you would from sitting on a pile of cash.

Good example of use case in the other response. Other use cases:

- you want a seat at the board or at least a hotline to someone up the chain in a key partner company. This will give you insight and influence in your key partner's plans, health, future products, as well as CI.

- drive costs down. Buying a stake in a supplier doesn't necessarily mean you will pay less, but you get some of it back through your stake.

- getting access to know-hows/technology/ consulting/distribution.

- reimbursement for know-hows/technology/consulting/distribution. i.e. you a have substantial distribution channel in a vertical market, but developing it does not align with your focus. You can sell it at a big discount, squeeze it as much as you can, or lease/sell it to a company which will find a tremendous persistent value in it. Compensating you according to the value they gain in hard currency is difficult, even impossible for smaller companies. Getting equity or options in the partner company while leasing/selling your asset to them will ensure you get maximum value out of an under utilized asset.

Makes sense to keep a foot in that door. Lenovo are eating the PC market, and this will also no doubt ensure things like Android, Chromebooks and Google search by default remain on Lenovos agenda.

Are we seeing a thawing of relations between Google and China now?

What does it means for Moto G (the cheap and good android phone) and Moto X (the Nexus 5 competidor)? Is Google quitting Motorola?

I'm getting 404 on this link. Did they just pulled the article away?

Not sure why it's 404'ing, but Reuters is reporting it as well: http://www.reuters.com/article/2014/02/07/us-google-lenovo-i...

Yes they did. Don't really know why, but it was fine a couple of minutes ago.

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