Part II. Why did Google buy and sell Motorola?

In Part I, I introduced what happened in Google's acquisition and sale of  Motorola Mobility and gave the basic reasons behind these two transactions.

Through simple subtraction, it appears that Google had taken a $9.5 billion hit from the price difference. However, breaking down the parts of the initial acquisition and changes that happened in the past two years leading up the sale tell a different story about how much Google had actually lost or, in fact, strategically gained.

Breaking down Google's acquisition cost of $12.5 billion, we see the actual cost of acquisition boils down to $1.5 billion assuming the following figures for Google's gains through the transaction, as illustrated in Figure 1, my back-of-the-envelop pie chart, below:

$3 billion from Motorola's cash on hand
$1 billion from Motorola's tax credits
$2.4 billion from the sale of Arris, Motorola's set-top business
$2.9 billion from the sale of Motorola Mobility this year
$1.7 billion as a minimum valuation of Motorola's patents in hindsight, although Google initially valued them at well over $5 billion in 2012

... which totals to $11 billion. Therefore, the cost of acquisition was essentially $12.5 - $11 = $1.5 billion. Whether this is a good deal could be too early to tell, but it's certainly a totally different number from $12.5 billion.

Figure 1.

If I assumed Google's optimistic $5.5 billion valuation of Motorola's patents, Google would actually be making a gain on the buy and sell.

Of course, I recognize that my numbers are prone to error, and that this summary of items through addition may not be the most accurate way to dissect the change in worth for Google and Motorola, but it provides fundamental insight into alternate sources of revenue that compensate for the high price Google paid two years ago.

Not to mention, Google reaps strategic benefits from the deal because it has locked up vital patents to defend its Android ecosystem.

To cap it off, Google took advantage of significant tax benefits, up to $1 billion immediately and $700 million tax deductions a year through savings from tax deductions for future profits and Motorola's net operating losses both domestically and abroad.  I did not take this into account in the pie chart but I would comment that it has been a smart way to save on taxes.

I am curious to see Lenovo and Motorola's progress, especially given optimistic views grounded in Lenovo's successful past upon acquiring ThinkPad.