Google sells Motorola to Lenovo for $2.91 billion.

Google has agreed to sell its Motorola Mobility division to Lenovo, marking a rapid retreat after less than two years in the handset business.

The deal values the business at $2.91bn in cash, stock and deferred payments, the companies said, and is set to leave Google with a stake of around 5 per cent in the Chinese hardware maker.

Google’s $12.5bn acquisition of Motorola in May 2012 marked the high point in the smartphone patent bubble, as the internet company raced to make up for a shortage of intellectual property that had left its Android mobile ecosystem vulnerable to legal attack.

Motorola’s trove of 17,000 patents was the main attraction for Google, though its hardware business was seen as an extra incentive, giving it the option to move into its own branded devices against the likes of Apple, Nokia and BlackBerry. However, the move risked antagonising other makers of Android devices and Google failed to reignite sales for the business. The division lost $645m in the first nine months of last year.

For Lenovo, the purchase represents a second multibillion-dollar deal acquisition within a week as it accelerates its move into western computer and handset markets. Last week it announced a $2.3bn purchase of IBM’s industry-standard server business, which makes low-margin computers based on the same technology underlying PCs. The deal “gives Lenovo a brand name, it’s very similar to when they bought the IBM PC business – that’s worked very well”, said Ken Dulaney, an analyst at Gartner.

However, the sale to a Chinese group is a reversal of Google’s attempt to revive Motorola as a “Made in America” brand. The company late last year opened a factory in Texas for assembling its Moto X handsets, a task typically done in mainland China by outsourced manufacturing such as Foxconn.

Lenovo is set to pay $660m in cash and $750m in stock at the time the deal is closed, with a further $1.5bn payment in the form of a three-year promissory note. The stock component will be covered by a collar putting a cap and floor on the number of shares to be issued, the companies said. As part of the sale, Lenovo will assume 2,000 patents, the two companies said. Google had already sold the TV set-top box business, called Motorola Home, for $2.6bn.