NEWS ANALYSIS: Google has sold off Motorola’s Home set-top box business for more than $2 billion. It was a smart move that should positively impact the companies.
Google announced on Dec. 19 that it has signed a deal with Arris to sell off its Motorola Home set-top box business in a deal valued at $2.3 billion. The deal includes a little over $2 billion in cash, as well as $300 million in Arris stock, giving Google about 15 percent ownership in that company.
The move is being called a good one for Google and Arris, and could lighten the otherwise heavy load Motorola has become on the search giant’s balance sheet.
Google closed its acquisition of Motorola for $12.5 billion in May. Since then, the company has been going through the mobile firm with a hacksaw trying to find places to cut and save money. In retrospect, $12.5 billion might have been too much to pay for Motorola
. And now, Google needs to find some ways to justify to its shareholders that the deal was a good one. Selling Motorola Home was one piece of that puzzle.
But why? What made the Google-Motorola sale necessary? Here are some of the reasons.
1. Motorola Home had poor prospects for near-term growth
Motorola Home is popular in the set-top box world. However, there’s little in the way of growth opportunities in that market. Cable providers and satellite companies are easily getting devices into consumer homes, making it harder and harder for Motorola to sell products into the channel. Over time, it’s possible that the set-top box business will lose steam as the market hits critical mass.
2. Shareholders are calling for a return
Google has no choice but to find a way to raise some cash from Motorola. The company paid $12.5 billion for the company
and so far, hasn’t been able to justify that price. With a $2.3 billion sale to Arris, it’s showing investors that Motorola might have had more value than some thought.
3. Arris might be a lucrative investment for Google
The other side of this deal is that Google gets about 15 percent of Arris. That could be a good thing for the company. Arris’ white box services are performing quite well and the company’s revenue and profits are on the rise. It’s a good time to be an Arris supporter.
4. Remember TiVo
Earlier this year, TiVo launched a patent-infringement lawsuit against Motorola, saying that its set-top boxes violated patents. Although it’s likely that the case will be resolved with a licensing agreement, it was a big headache that Google really didn’t need to deal with.