The Moto X was Google's vision for the future of mobile technology. Billed as the world's first artificially intelligent phone, its permanent listening mode enabled it to serve up directions or give weather forecasts in response to spoken commands. That was until the search giant called an end to the adventure with the $2.9bn (£1.8bn) sale of Motorola to rising Chinese star Lenovo on Wednesday, a move that will free its engineers to focus on other revolutionary technologies.
Google's recent acquisitions – from robot maker Boston Dynamics to a London company that aims to make computers think like humans – show how its ambitions stretch far beyond the smartphone. After all, mobile phones are now a low-margin, high-volume manufacturing business, which makes them a better fit for Lenovo than Google. And smartphone technology is arguably reaching the limits of innovation. There are only so many processors, fingerprint scanners and voice-operated digital assistants you can usefully squeeze into a wallet-sized computer.
Gazing through their Google Glass lenses, founders Larry Page and Sergey Brin have their sights set on more distant horizons: hot air balloons that carry internet connections to the remotest parts of the world; cars that drive themselves; humanoid robots; and, more prosaically, internet-connected home appliances like fire alarms. Google's U-turn on its first major hardware venture has not dimmed its desire to achieve a breakthrough on other projects.
In a letter to staff about the Motorola sale, Page emphasised the exciting opportunities offered by products like Google Glass and intelligent smoke detectors: "The dynamics and maturity of the wearable and home markets, for example, are very different from that of the mobile industry. We're excited by the opportunities to build amazing new products for users within these emerging ecosystems."
Google X, the secretive advance research group run by former military scientist Regina Dugan and originally housed within Motorola, will remain with Google. Here, according to Astro Teller, the lab's imaginatively titled Captain of Moonshots, the mission is to find "science-fiction-sounding solutions". Dugan's teams are developing digital tattoos that function as identity tags, contact lenses that monitor glucose levels, and software and sensors that will enable cars to drive themselves.
The creator of Google's Android operating system, Andy Rubin, is now running a robotics division, and has bought a string of companies specialising in mechanical eyes, arms and legs. One of them is Schaft, a Japanese outfit whose robots can climb ladders, use power tools, and walk on uneven ground.
Google's biggest recent purchase is Nest, which makes self-learning, programmable thermostats and smoke detectors. With it came chief executive Tony Fadell, an engineer whose skill in fusing hardware and software may well be applied to a broader range of products. This week's acquisition of UK-based DeepMind Technologies, a leading artificial intelligence firm, underlines how far Google has moved on from Motorola. Despite the sci-fi connotations of the deal, it is likely that DeepMind's talented employees, led by its chess-prodigy founder Demis Hassabis, will report to Google's search boss, Jeff Dean, rather than Rubin, with the expectation that artificial intelligence will help understand more complex and spoken queries.
There is plenty of financial firepower left for more DeepMind-like deals, despite Motorola being Google's most expensive acquisition ever. This is a company that can afford for expensive, risky transactions to fail. Its formidable reserves stood at $57bn in cash and investments at the last count.
In reality, the damage for Google has been more reputational than financial. Motorola was loss-making, and its quarterly shortfall under Google ownership reached $1bn in September. Add in the December quarter losses, and the $12.5bn purchase price, and Google has spent perhaps $14bn.
However, this should be set against the $13.7bn in value that Google has received from Motorola, say analysts at Jefferies. This includes the $2.9bn in cash in Motorola's coffers when it was acquired; the sale of Motorola's set-top-box business for $2.35bn; Lenovo's $2.9bn offer; and $5.5bn of Motorola patents, many of which Google will keep. The patents were a key factor in the acquisition, giving Google ammunition to counter-sue rivals like Apple who were sniping at the success of Android with patent infringement suits against the likes of Samsung, whose phones use Android.
Arguably, this aspect of the deal was not a success either. Samsung is facing an $893m damages bill after losing a major court battle against Apple. But this has not stopped Android's unstoppable rise. Google's software is to phones what Windows was to the personal computer – the global standard.
"Google has been unwinding this 'bet' almost from day one," Mark Mahaney of RBC Capital Markets. "The key is that Google does maintain patent protection for Android and is divesting itself of a sub-par asset that didn't jive with its core competencies. We also respect Google's willingness/ability to take on the M&A risk and then to later reverse its decision. Management flexibility is a good thing, in our book."
Investors seem to agree: Google's shares rose when news of the disposal broke. They would rather see Google owning thousands of Motorola patents – and a number of highly futuristic companies – than a loss-making phones business.
