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Google: The emperor's new hardware

Allow me to be cynical for a moment: Google has done what Lenovo, on its own, never would have been allowed to:

Stripped down an American icon and sold off the parts.


Motorola Droid 4 smartphone.
Getty Images
Motorola Droid 4 smartphone.

To be fair, Motorola Mobility's fate would have been more grim without Google's ill-fated adventure. The company was in decline, saddled with enormous overhead and a legacy pre-iPhone handset business that was going nowhere. Rival smartphone maker HTC's trajectory since then makes it clear: On its own, Moto had no chance.

(Read more: Lenovo-Motorola deal may raise espionage concerns)

But that doesn't excuse what Google did here. It used the pixie dust it has admirably gathered from search, Android and other innovations, and enticed a lot of people (including Motorola's management) to believe in a long-term vision Google itself never fully embraced.

Consider: It was just July 4 when the company put out a full- page ad in major U.S. newspapers, touting its upcoming assembled-in-the-USA Moto X. The closing text:

"We knew this would be a challenge. In fact, some people said it couldn't be done. But we're not just any company. And nothing this exciting ever comes easily."

Ahem. Less than six months after the Fourth of July, Google is selling off Motorola to Chinese giant Lenovo, a company that really has shown long-term commitment to both hardware and American manufacturing.

Of course, buying Motorola for $12.5 billion never made much sense for Google anyway. (The true cost to Google was a few billion less, once you factor in the cash and tax breaks Moto brought to the table.)

Google's real choices were slashing the business up front while losing tons of money and just taking the patents; or, gutting the business of everything but smartphones, losing a ton of money, and possibly failing anyway.

(Read more: Cyber espionage: The Chinese threat)

The odds were long from the beginning. At the D conference last June, where Motorola CEO Dennis Woodside extolled Google's commitment to smartphones, I posed what I saw as the central question about the Motorola adventure:

Even if you build a great product, what makes you so sure it will sell? Apple tried hard to gain share with the Mac 13 years ago, had an arguably better product than Windows PCs, but still failed because the PC market was too mature for an upstart to make headway, I said. I pointed out Apple and Samsung are now just as dominant in smartphones.

A month later I flew from Silicon Valley to Chicago to get a preview of the upcoming Moto X flagship phone, talk to executives, and tour the sprawling new urban headquarters Google was building out for Motorola in downtown Chicago. Mayor Rahm Emanuel even came out for a hard-hat tour. (The price tag for that project was obviously in the hundreds of millions of dollars.)

My cautious reaction, which I shared with Motorola brass: Nice phone, but it's not enough. Google is going to have to give you hundreds of millions of dollars in marketing budget to lure smartphone buyers away from Apple and Samsung. Was Google willing to bet that much?

Google would spend enough, they said.

(Read more: Samsung bows to Google to dial back Android tweaks)

But Google didn't. As the holiday season approached, I saw targeted campaigns in geeky publications, but nothing on the level of the mass-market blitzes that Samsung and Apple execute routinely. Anyway, the phone didn't sell.

What should this teach us about Google going forward? Certainly when it comes to hardware and manufacturing, its mouth writes checks its body can't cash. (Remember the Nexus Q music streaming device, also made in the USA, that Google launched and never delivered?) I also think it shows that in the long run, Google CEO Larry Page is a lot more pragmatic than Google's fanciful press releases and futuristic product peeks suggest.

I hope, though, that Google makes a cultural adjustment after this Motorola debacle. Sure, analysts and much of the tech press are giving the company a pass because it has so much money and success that losing a few billion doesn't matter that much. The stock was even up 2 percent today on the news. But that ignores the less obvious costs here. Many Motorola employees stuck with the company through painful rounds of cuts because they believed in Google. Some moved from Libertyville to Chicago because Google promised a new urban headquarters. Google, for the second time, talked a big game about American manufacturing and didn't follow through. Unlike in a failed software experiment online, there are real human costs when you back away from something like that.

Bottom line: A lot of people are saying it's not a big deal for Google to dump Motorola because Google is so rich and successful. But that's exactly why a lot of people trusted Google when it talked such a big game about Motorola to begin with. Here's hoping a brilliant company is a bit more careful next time.


—By CNBC's Jon Fortt. Follow him on Twitter @jonfortt

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