Google finally dumps a $12 billion mistake

Google (GOOG) is dumping one of its biggest investments after less than two years.

The company has sold Motorola Mobility to Chinese computer company Lenovo Group for $2.9 billion, after buying it in 2012 for $12.5 billion.

Google never really clicked with Motorola or made much headway in the ultra-competitive smartphone business. Motorola suffered steep quarterly losses and took more than a year after the acquisition to come out with new phones -- the flagship Moto X and the low-cost Moto G. 

The one thing Motorola did well was annoy other handset makers that used Google's Android software. It's one thing for Google to make software for the Samsungs of the world, but it's another thing altogether to make software and a competing phone to boot.

Ditching Motorola should ease the tension with smartphone makers. "It all points to Google thinking in the short run that they're better off betting on Samsung and keeping them close," Kantar analyst Carolina Milanesi told Reuters.

Google gets other benefits in this deal. It will keep most of Motorola's mobile patents, which give its Android software a key defense against patent infringement claims from other companies. And it already sold Motorola's cable box division to Arris Group for $2.3 billion, which took some of the pain out of Motorola's hefty purchase price.

The Lenovo deal works out well for all sides. Google can put this chapter behind it and throw its energies into Android. Lenovo gets an "all-important foothold to get into North America," IDC analyst Ramon Llamas told The Wall Street Journal.

Lenovo is one of China's largest handset makers, but only had a 4.5 percent market share globally, according to research firm IDC. Though Motorola won't give Lenovo nearly the dominance of a Samsung or an Apple (AAPL), it can offer a nice starting point for expansion into the West.
  • Kim Peterson

    Kim Peterson is a financial journalist covering business and the economy. She has written for several online and print publications, including MSN Money and The Seattle Times.