Google has signed an agreement to sell Motorola to Lenovo for $2.91 billion, the company announced after markets closed on Wednesday.
Google will keep the "vast majority" of around 17,000 patents it acquired when it bought Motorola in 2012 for $12.5 billion.
Google's stock was up over 2% in after-hours trading shortly after the announcement.
Motorola has been running semi-independently from Google since the acquisition went through. Last year, Motorola released its first flagship phone, the Moto X, since becoming a Google company. The Moto X was well-reviewed, but it's unclear how many were sold. Motorola has steadily been dropping the Moto X's price since the launch last fall.
Motorola's revenues continue to shrink year over year. In Q3 2013, Motorola revenues were $1.18 billion, down from $1.78 billion for the same quarter a year before. Google will report earnings for Q4 2013 Thursday afternoon.
Here's the full announcement from Goog CEO Larry Page posted to the company's blog:
We’ve just signed an agreement to sell Motorola to Lenovo for $2.91 billion. As this is an important move for Android users everywhere, I wanted to explain why in detail.
We acquired Motorola in 2012 to help supercharge the Android ecosystem by creating a stronger patent portfolio for Google and great smartphones for users. Over the past 19 months, Dennis Woodside and the Motorola team have done a tremendous job reinventing the company. They’ve focused on building a smaller number of great (and great value) smartphones that consumers love. Both the Moto G and the Moto X are doing really well, and I’m very excited about the smartphone lineup for 2014. And on the intellectual property side, Motorola’s patents have helped create a level playing field, which is good news for all Android’s users and partners.
But the smartphone market is super competitive, and to thrive it helps to be all-in when it comes to making mobile devices. It’s why we believe that Motorola will be better served by Lenovo—which has a rapidly growing smartphone business and is the largest (and fastest-growing) PC manufacturer in the world. This move will enable Google to devote our energy to driving innovation across the Android ecosystem, for the benefit of smartphone users everywhere. As a side note, this does not signal a larger shift for our other hardware efforts. The dynamics and maturity of the wearable and home markets, for example, are very different from that of the mobile industry. We’re excited by the opportunities to build amazing new products for users within these emerging ecosystems.
Lenovo has the expertise and track record to scale Motorola into a major player within the Android ecosystem. They have a lot of experience in hardware, and they have global reach. In addition, Lenovo intends to keep Motorola’s distinct brand identity—just as they did when they acquired ThinkPad from IBM in 2005. Google will retain the vast majority of Motorola’s patents, which we will continue to use to defend the entire Android ecosystem.
The deal has yet to be approved in the U.S. or China, and this usually takes time. So until then, it’s business as usual. I’m phenomenally impressed with everything the Motorola team has achieved and confident that with Lenovo as a partner, Motorola will build more and more great products for people everywhere.
While Google is selling Motorola for much less than it paid for it, the deal isn't as bad as it seems at first. Google is still keeping a bunch of Motrola's patents, which it can license out to other companies. Google also sold off Motorola's cable box business (the home division) for $2.5 billion.
Meanwhile, it's worth noting that Samsung, which makes more Android phones than any other manufacturer, is getting more cozy with Google. The two companies now have a 10-year patent deal. There's also a new report from Recode that says Samsung has agreed to feature more Google services in its Android phones.