Google's Big Bust: Motorola Mobility Sold to Lenovo for Huge Loss

Sale for $2.9 billion follows Google's $12.5 billion purchase in 2012.

Eric Schmidt, Google's chairman, speaks during a press conference in New York, where Motorola introduced three new smartphones, the first since it became a a part of Google Sept. 5, 2012 .

Google and its chairman Eric Schmidt are selling Motorola's smartphone business to Lenovo for $2.9 billion, the company announced Wednesday.

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The largest purchase in Google's history has now become its worst investment, as the company plans to sell Motorola Mobility to Chinese PC maker Lenovo for $2.9 billion at a huge loss from the 2012 acquisition of the handset maker for 12.5 billion in 2012.

Google CEO Larry Page announced the sale in a company blog Wednesday, explaining that Google will retain the vast majority of Motorola Mobility's patents to defend rights to its Android products, which is a major reason the Mountain View tech titan bought the handset maker.

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"This move will enable Google to devote our energy to driving innovation across the Android ecosystem, for the benefit of smartphone users everywhere," Page said. "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."

Motorola Mobility has dragged down Google's profits as the company worked to revamp the company's phones including the Moto G and the Moto X. Google already sold the Motorola Home cable box unit to the Arris Group in 2013.

Google is increasing its hardware making business with the design of Google Glass, the Chromecast streaming media player and now smart home devices following its purchase of Nest, which designs WiFi-connected thermostats. Lenovo is better suited to help revitalize Motorola Mobility, Page said, alluding to the China-based company's innovation following the purchase of the ThinkPad from IBM in 2005.

"Lenovo has the expertise and track record to scale Motorola into a major player within the Android ecosystem," Page said.

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Once approved by regulators this deal gives Lenovo a chance to expand its smartphone business beyond China into the U.S., Western Europe and Latin America.

"The acquisition of such an iconic brand, innovative product portfolio and incredibly talented global team will immediately make Lenovo a strong global competitor in smartphones," Lenovo CEO Yang Yuanqing said in a release. "We will immediately have the opportunity to become a strong global player in the fast-growing mobile space."

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