Lenovo wraps up deal for Motorola

Phone unit purchase to help Chinese firm gain an edge in mature markets

Lenovo Group Ltd closed its $2.91 billion acquisition of Motorola Mobility from Google Inc as the Chinese company tries to boost global smartphone sales that were surpassed by crosstown rival Xiaomi Corp.

The deal includes the payment of $1.41 billion in cash and Lenovo stock at closing, with $1.5 billion still to be paid in a three-year promissory note, Lenovo said in a statement on Thursday. Lenovo paid Google $228.5 million to adjust for the excess cash with the company.

The transaction left most of Motorola's patent portfolio with Google while Lenovo received a license to the intellectual property. Lenovo Chief Executive Officer Yang Yuanqing said Motorola provides a shortcut for entering mature markets and will make the Chinese company "a global player".

Motorola's smartphone models include the Moto X, Moto G, Moto E and the DROID series.

The unit's headquarters are to remain in Chicago. Lenovo is taking on some 3,500 Motorola engineers, designers and other employees worldwide, including 2,800 in the United States.

Lenovo boosted global smartphone shipments by 38 percent in the third quarter to 16.9 million units, ranking it fourth worldwide, International Data Corp said on Wednesday. Its market share expanded to 5.2 percent, from 4.7 percent a year earlier.

Lenovo has made inroads beyond China, with international markets accounting for 20 percent of smartphone shipments in the third quarter, compared with 9 percent a year before, IDC said.

Motorola's sales in Asia, Latin America and the United States would have boosted Lenovo's global ranking, Kiranjeet Kaur, a Singapore-based analyst with IDC, said on Thursday.

"If the deal had closed by now, they would have been in the number three spot," Kaur said of Lenovo.

Lenovo was surpassed in the quarter by Xiaomi, which surged into third place after more than tripling shipments to 17.3 million units, taking 5.3 percent of the world market, IDC said. Both Lenovo and Xiaomi have headquarters in Beijing.

Samsung Electronics Co, based in Suwon, South Korea, remained the world's largest smartphone vendor, with 23.8 percent, followed by Cupertino, California-based Apple Inc with 12 percent, IDC said.

"By building a strong number three and a credible challenger to the top two in smartphones, we will give the market something it has needed: choice, competition and a new spark of innovation," Yang said in the statement.

Motorola was not among the top five vendors in IDC's ranking. It had operating losses of more than $1 billion last year, according to data compiled by Bloomberg. Yang has said Lenovo could turn the unit around in four to six quarters.

"Both firms face challenges," Neil Mawston, executive director of researcher Strategy Analytics, said in an e-mail on Thursday. "Integrating successfully the two companies next year may not be quite as easy or smooth as Lenovo and Motorola expect."

The closing completes $5 billion in acquisitions Yang announced in January, following the Oct 1 closing of the $2.1 billion purchase of International Business Machines Corp's low-end server unit.

The Associated Press contributed to this story.