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back to article Yes, Google can afford to lose $9bn in Motorola sale. But did it really?

So just how much has Google lost on buying and selling Motorola Mobility? $9bn - as The Telegraph seems to think? $7bn as simple arithmetic would seem to indicate? Or how about a very decent indeed profit as the vagaries of tax law might indicate - with that tasty patent portfolio thrown in for free? Let's start with a number …

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Paris Hilton

What a mess

Really, what a mess, and on top of that the Suspicions around the deal with Samsung.

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Re: What a mess

I wouldn't say this is a mess. To the untrained eye it may appear so, but I should imagine, nay, put money on, this being Google's accountants/ strategists/ lawyers pan from the start. So we have;

- Buy a company with an operating loss for huge tax breaks (on top of the already huge ones in place)

- Sell off the profitable bits of it

- Strip out the loss making but still attractive parts and sell them (in this case to Lenovo)

- Keep enough of the carcass to offset against profits and create yet more tax breaks

- Acquire a shitload of patents to lock down the market in Android's favour, and potentially license to or sue infringing companies in the future

Many assumptions have been made of course, but to me this looks like a win win win win win for Google.

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Anonymous Coward

Re: What a mess

"I wouldn't say this is a mess. To the untrained eye it may appear so, but I should imagine, nay, put money on, this being Google's accountants/ strategists/ lawyers pan from the start. So we have;...."

As somebody who fulfils one of those functions in a not-directly related business, I can assure you that the smartest plans rarely go as expected. Sometimes you get lucky, but if it works out well assume that it did so by luck rather than judgement.

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Go

Re: Goldmember Re: What a mess

".....this looks like a win win win win win for Google." Indeed, but the funny thing is everyone seems to be focusing on the Google side of the deal and no-one seems to have thought to ask why the fudge Lonovo thought it was worth even $1bn without the patents?

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Re: Goldmember What a mess

"...why the fudge Lonovo thought it was worth even $1bn without the patents?"

_NO_ patents at all? I got lost with all the "what ifs" in the article, but I don't think I read that definitively.

Anyways, that's why I read the article, sadly there is no mention of why they bought it. Who knows, maybe in 20 years they will have hardware locked down so tight in China that the software/services players come begging...or so maybe they think :-/.

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Re: "why the fudge Lonovo thought..."

If Lenovo are planning on making Android phones only, why do they need those patents?

As long as Google is using them to shield Android makers from Apple/MS/etc in any patent-related battles then it is not that important to Lenovo. They must see an opportunity to enter the market even more and profit.

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Pirate

Re: "why the fudge Lonovo thought..."

"If Lenovo are planning on making Android phones only, why do they need those patents?....." Unfortunately it seems the mobe wars require a little MAD to keep everyone playing nice. I'm not sure I'd want to be reliant on Google's good will in the long run.....

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You lost me there

> $700m a year for eight years and $1bn immediately: call it a round $6.5bn?

Google's acquisition of Motorola was only completed on 22 May 2012. That's less than two years of ownership. So why are you calculating with eight years of Motorola Mobility losses?

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Re: You lost me there

Because (Tim reckons) Google's (extremely) high-powered tax lawyers will have found a way to keep the tax losses - see article. Thanks for explaining that for us Tim :)

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Re: You lost me there

And I'd say that the supposition is almost certainly true. Otherwise, the price would be higher than 3bn, because just the remaining 5 years of tax deductions amount to 3.5bn.

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Re: You lost me there

I'm also lost here:

"$700m a year in tax deductions from future profits"

I thought that a tax deduction was the amount that your were able to deduct from your taxable profits. In that case, you only save the tax that you would have paid on the $700M. I guess that makes the savings about 30% of what was stated.

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Re: You lost me there

Tax law rewards you for saving loss-making companies. So I think you're allowed to take into account teh losses from the company for up to 5 years before you bought it. Assuming that's not been used already. As the whole of Motorola hadn't made profits for ages, I think that meant Google could expect 5 years losses of over a billion a year. Plus the 2 years they owned it

If so, that's $7 - $10bn of losses at about 30% corporation tax = around $3bn.

Better that a loss making company be rescued than not. So there are many situations when the tax write-off is a great idea. Even possibly here, as Google didn't kill Motorola they just sold it off in bits. But a company that's not looked like making a profit for that long is probably no loss to the economy, and some of its parts were worth something. Google were willing to stump up the cash adn absorb 2 years of losses (risking never being able to sell), so I guess they probably deserve the tax breaks - which have pretty much worked as designed. Even if it does look a bit icky.

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Anonymous Coward

Re: You lost me there

I thought that a tax deduction was the amount that your were able to deduct from your taxable profits. In that case, you only save the tax that you would have paid on the $700M. I guess that makes the savings about 30% of what was stated.

good point, perhaps the author is confusing deductions with credits.

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@I ain't Spartacus Re: You lost me there

Thanks for the clear explanation, Non-Spartacus.

(And thanks a lot to all the commentards who downvoted my question. Obviously my search for enlightenment deserved to be punished, FFS.)

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I've since seen that Google is keeping the Project ARA bit. So they may well have an decent argument that they do get to keep those tax losses. They've sold out the assets, not the holding company perhaps?

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Losses are losses

If Motorola made losses while owned by Google, those should be added to the costs of Google, since that money went from Google into Motorola. Right?

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Re: Losses are losses

Absolutely. The article seems to ignore the fact that in order to reclaim losses, you have to incur them in the first place! At best you end up neutral.

If the idea is that Google are reclaiming losses incurred by Moto before they bought the company, then how come it's ok for Google to offset the loss after selling to Lenovo, but Moto couldn't offset it elsewhere in their biz after selling to Google.

The whole article is speculation.

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Re: Losses are losses

>If Motorola made losses while owned by Google, those should be added to the costs of Google, since that money went from Google into Motorola. Right?

True, but they are presumably operating losses, which have been paid for out of earlier profits - otherwise the company would not have paid its bills and been rendered insolvent. The only way the losses would be carried forward would be if they had borrowed money which has to be paid back in order to pay their debts.

I think the article said motorola still had a cash pile, so they don't have a negative bank-balance for Google to take on.

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Keeping track of all those billions must be hard work

A billion here, a billion there, pretty soon you're talking real money

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Joke

Re: Keeping track of all those billions must be hard work

Really? I keep a similar amount down my codpiece...

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This post has been deleted by a moderator

Really?

So what d'you mean, this happens when you use Linux?

That you gain a lot while others think you lost?

Absolutely right indeed!

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> This is what happens when you use Linux.

A meme is born.

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Anonymous Coward

"This is what happens when you use Linux."

Yep - presumably The Borg tried to calculate the investment benefits using some crappy not quite entirely unlike Office copy - Google Apps maybe?

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What's $9bn amongst friends anyway?

Google probably has more than that lost down behind the couch cushions at The Chocolate Factory's HQ.

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Also strike against Microsoft

Don't forget that with this move Google has now close ties with Lenovo " number 1 business/windows pc manufacture " .

It's also a gentle strategic move of Google's part to push Lenovo to ship products

witch integrate service of Google (Chrome OS, Android, Google docs, gmail and other services) to it's business customers worldwide and of course Chinese home user.

(Microsoft didn't see this coming. )

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Re: Also strike against Microsoft

I know that Google's servers are custom-made, saving them maybe billions. Does anybody know if Lenovo is in the server biz somehow. That tie-in could save Google even more.

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Re: Also strike against Microsoft

Remember? Just last week Lenovo bought IBM's x86 server line. Lock, stock, and engineers.

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Anonymous Coward

Yeah but...

Yeah but Google wasn't going to pay taxes anyway.

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Do we actually care if some evil (yes I know) big fat corporation lost a few billions???

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The point the article is making is that it is more likely they didn't.

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Ireland...

When will the EU close that tax avoidance heaven hole?

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Re: Ireland...

When the Irish economy stops being in need of a respirator to stay alive.

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Headmaster

Re: Ireland...

The Irish economy is doing fine without a respirator

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Anonymous Coward

Re: Ireland...

Do you really think that Ireland is the problem? Starbucks managed to pull off pretty much the same level of "tax management" in the UK without any reference to Ireland, and most of the rest of Europe would like to implement a "Tobin tax" but opposition from politically powerful firms in the City of London is one of the main barriers to it's implementation:

http://en.wikipedia.org/wiki/Tobin_tax#European_Union_financial_transaction_tax

The so called "Double-Irish Dutch Sandwich" has no impact on UK tax revenues anyway (it is designed to allow US companies defer payment of US corporate taxes) and even if Ireland adopted UK tax laws tomorrow, companies like Google would still find it tax advantageous to bill their UK sales through half a dozen other EU countries. And the UK is even more strenuously opposed to a single EU-wide Tax regime than Ireland is!

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Re: Ireland...

> The Irish economy is doing fine without a respirator

No, it isn't. It's held under the arms by EU subsidies and EU special rules allowing it to offer golden deals to non-EU companies to set up shop (and pay very little tax) in Ireland.

There isn't a country in the union which should love the EU as Ireland.

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Re: Ireland...

Yeah, I forgot to mention the Netherlands, that nice tulips chaps.

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Re: Ireland...

@ Vociferous

Yes there is, the UK ... with the "We want our money back" BS Maggie managed to make the UK look like the poor bastard of the Union, thus they bag more for less funding than the two other big players (I mean the Froggies and Sauerkrauts).

The area that loves the EU most is Corsica, they share their cattle around the island so each farmer gets way more subventions.

And, the one citizen of Europe who loves the EU the most is of course the Queen ugly betty II, she gets more money from the EU than anybody else ... and, out of the top 50, my guess would be 45 are British lords (only slightly exaggerated).

And it's us in the middle who have to pay up for all that. If at least we could have a EU football team, the dream team! I mean we deserve it .... and no, I don't like/watch football, I know it is a "very" popular or pubular sport in the UK and I have to compensate for speaking of our Queen like that ;-)

Click ↓ to downvote

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Facepalm

Am I Reading Variety?

The lead in to the story sounds like you recruited writers from Variety? Google's Off Handset Max Tax Axe trick ....or something.....

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Death and Taxes

Only sure things. Looks like Google has figures out both of them.

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No idea

What that article was on about.

However, while reading this accountancy gobbledegook, I became sure of one thing:

The sooner the B-ark is ready for launch the better.

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Re: No idea

Hi Carl,

Did you ever get that diploma in telephone sanitation? There could be good news coming your way soon.

Kind regards

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Very pleased you wrote this Tim, yet again the mainstream media are exposed.

Keep up the good work.

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Pint

Indeed thanks Tim , Or why Journalists ( and Bloggers ) are not Tax wizards ( pun ) and vice versa

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Look at this from the opposite side: Google would probably have paid 9bn just for the patents so they can help defend or deflect lawsuits. They know they are weak on mobile patents and open to attack from (mainly) Apple.

The attached company is irrelevant. 9bn was for the patents, sales of any assets are a nice bonus.

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Coat

Google is not going to use the patents to hit Apple, are you nuts ? They are gonna hit Microsoft, you know, all those billions that go over to Redmond, I thought it was like $1 or 2 for each and every Android handset sale.

Apple only attacks companies that steal tech it took years/decades to design and get right. Just read all the iPhone killer articles on elReg, you will see failed attempts to beat iPhone on coolness ... then Samsung succeeded with galaxy by creating a cc, as far a looks were concerned.

Go on and look at Samsung's offering, a black and white variant for each device, all look very close to the iPhone 3[G|GS]. They somewhat differ from Samsung/Nokia/HTC/YouNameIt devices that came out before iPhone.

Don't call me fanboy, I have a Z30.

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Facepalm

Food for thought...

So Google has the holding company which owns the patents.

OK,

So is it possible for Google to then transfer those assets (patents) to an Irish subsidiary and then use it for a Double Irish tax dodge?*

Wouldn't this also be a way to gain extra value out of the patents, regardless of how enforceable they are?

*I say dodge, but its all legal even if it leaves a bad taste in our mouths...

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Superb article

This is why I read the Register. Lightyears ahead of anything, including national newspapers. And knowing a bit about corporation tax, well thought through.

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Re: Superb article

Most kind. I'm sure the editor will be taking requests for pay rises soon......

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I would say this says more about those who write tax laws and those who interpret them than anything else.

Perhaps the world could club together to organise a big convention for them on a tropical island in the Pacific somewhere, and when they're all having a party, nuke it from orbit.

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