How Google's Costly Motorola Maneuver May Pay Off

[Commentary] Google suffered some expensive bruises in its two-year foray into making smartphones. But the expense wasn't as big as it appears, and Google may have achieved some strategic ends.

Google's primary goal in smartphones is to undercut the competition and get them into as many hands as possible. This generates more traffic to its search engine and the ads that surround it. By unloading its Motorola Mobility handset business to China's Lenovo Group, Google gains a partner that may inflict damage on rival Apple, while balancing the dominant market power held by partner Samsung. It could also resolve some nagging conflicts in its sprawling Android ecosystem. In Lenovo, Google gains another partner with grand ambitions to penetrate the global smartphone market with low-cost phones, a segment Apple has ignored. This strategy helped Google's Android software grow to power the majority of the world's smartphones -- four of every five smartphones shipped in 2013 ran Android, estimates Strategy Analytics. By flooding the market with Android phones, Google wards off Apple's threat to bypass Google services on its own phones. The deal also helps Google bring more balance to the Android ecosystem. Today, Samsung dominates the Android world, selling more than six times as many phones as its nearest rival. A combined Lenovo and Motorola can help offset Samsung's strength, reducing the risk that the Android world is dominated by a single hardware maker.