Google’s crazy expensive $12.5 billion purchase of Motorola has been finalized earlier this year, but the Search giant is yet to really take advantage of it.
A Google exec revealed a few weeks ago that the purchase was mostly about the patents rather than building Motorola Nexus devices – although recent reports do suggest that Google and Motorola are working on both a new tablet and smartphone – but those patents failed to help Google deliver any decisive blows to its main rivals in courts, Apple and Microsoft.
But now Forbes says that the $12.5 billion purchase may not be as expensive as it sounds, suggesting that the deal will only cost Google $1.5 billion on the long run. But is that really so?
The publication argues that Google got some of its cash back by selling the Motorola set-top box to Arris, but that the real win for the company is Motorola’s unprofitable business – yes, no joke. Apparently Motorola’s “accumulated tax losses” can be used by Google in its tax reports:
“The tax benefits of the deal make what was a good deal into a great deal,” said Robert Willens, a New York accounting and tax expert. He estimated that through the acquisition, Google can expect to reap $700m a year in tax deductions from future profits each year through 2019. Google also will be able to immediately reduce its taxes by $1bn due to Motorola Mobility’s US net operating loss, and by a further $700m due to its foreign operating loss, he said.
Do we want Motorola to keep bleeding money through to 2019 so that Google can write the losses off its tax bill? We’d rather have Google turn Motorola around to make it a profitable subsidiary and a worthy rival to other Android OEMs. We’re no tax experts, but wouldn’t that be the proper way to recover the $12.5 billion investment?
Meanwhile, it’s late 2012, and the fact remains that Google paid a lot of money for a business that’s yet to be lucrative for the company. Anyone looking forward to a Motorola Nexus device?
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I think the article mostly means the losses Motorola has accumulated up until now. Those can be counted against future profits. Future losses will reduce profits.
You arent thinkin about it in the correct logic. Its a Win/Win for Google, if Moto turns around great they make money. If they tank great they still wont lose money because of the tax write off. So its a Low risk bet for Google while still getting a Hardware production like to learn from and essential patents that even thou arent winning litigation at the moment are still good to have on your side. I dont think that Google will intentionally tank the company for tax savings that just stupid. If that was the case they wouldve let the CEO stay at the helm and not put one of their Key executives there to run the show.
What about the $3billion in cash Google acquired with the company? Does this put them in profit? If so, thats not a bad deal and its a very well done to some Googler!
Motorola X phone. Nuff said. Who doesn’t want a Razr Maxx/ Nexus hybrid?
Ha ha,Author is dreaming Motorola to be worthy rival to Samsung or Apple,
dude,Motorola is the only company in the world packing all it’s stuff across the rest of the world,Even Huawei is dreaming bigger than this lame duck subsidiary.