Google actually made a profit on its Motorola deal

Yes, Google paid $12.5 billion for Motorola Mobility in 2011. Yes, the company intends to sell much of it to Lenovo for $2.91 billion. But the simple math that yields a $9.59 billion loss is missing a few details.

First, when Google bought Motorola, it wrote off an existing loss against tax, yielding a benefit of perhaps $6.6 billion. Then Google sold Motorola’s set-top box division for $2.35 billion plus stock from acquirer Arris. Add those together and Google is only $640 million out of pocket, if that. But there’s more.

That $640 million bought some great assets. Google is keeping Advanced Technology and Products, the patent and innovation-generating group that’s working on cool projects like the Ara modular phone. Google also acquired a substantial patent portfolio from Motorola, only a fraction of which is going to Lenovo with Motorola. Before this, Google was weak on mobile patents.

While some say those patents have low value in court, they include a number of standards-essential patents that are Google’s ticket to the almost-cartel of mobile phone technology companies. They allow Google to barter with the other players and are a powerful tool for protecting Android against damaging royalty bills — open source software and volume-linked royalties don’t mix.

This deal is not a loss, nor is it a sign of a failure to use Motorola. Motorola was not a good cultural fit for Google. Larry Page got rid of those annoyances, made the Android market more competitive by providing Lenovo a brand with which to enter the U.S. smartphone market, bought off Samsung, picked up a patent arsenal and a supersmart R and D group — and broken even in the process.

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