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Lenovo faces chance to become rare PC maker successful in phones

Lenovo is buying Motorola Mobility to shield itself from patent lawsuits, according to analyst

By Michael Kan, IDG News Service
January 30, 2014 05:51 AM ET

IDG News Service - PC makers have often struggled when it comes to selling smartphones, but China's Lenovo could be on the cusp of making a breakthrough. The company's US$2.9 billion deal to buy Motorola Mobility from Google might end up paving the way for Lenovo to become one of the rare PC makers with a prominent handset business.

That's already been happening in Lenovo's home market of China, where the company is a top smartphone vendor. In last year's third quarter, it ranked second in the market, behind Samsung Electronics, with a 13 percent market share, according to research firm Canalys.

Outside of China, Lenovo's handset business has been contained to emerging markets such as Southeast Asia. But Wednesday's deal to buy the Motorola Mobility handset business, if completed, will give the Chinese company over 2,000 patents and a foothold in the U.S. market.

Lenovo has yet to decide how it will leverage both its own brand and the Motorola name, according to company CFO Wong Waiming. But the Chinese electronics maker plans to come out with an array of different products under both brands, he said in a call with journalists on Thursday.

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Combined, Lenovo and the Motorola brand "will definitely challenge the smartphone leaders over the next few years," Wong said, later adding, "The smartphone is a key pillar for our future growth."

With Motorola Mobility, Lenovo would become the world's third-largest smartphone vendor, with a collective 5.4 percent market share, according to research firm IDC. However, this puts the company's shipments far behind that of Apple and Samsung, which have 15.8 percent and 31.5 percent of the market, respectively.

Like Lenovo, both Apple and Samsung have prominent PC businesses. But other PC makers trying to follow the same approach have often stumbled.

U.S. companies Dell and Hewlett-Packard have tried to launch smartphones, only to later exit the business. HP re-entered the mobile devices market this month, with two voice-enabled tablets for India.

Taiwanese vendors Acer and Asus are also developing more smartphones, as PC shipments continue to decline. But both companies have yet to drum up the same kind of sales Lenovo has for its handset business. Asus, however, plans to bring its smartphone/tablet hybrid, the Padfone, to the U.S. later this year through mobile carrier AT&T.

Unlike its competitors, Lenovo can rely on China to prop up its handset business. The country is the biggest market for smartphones and Lenovo has long reigned as the nation's top PC maker, using its extensive sales channels and strong brand recognition to sell products.

The same has gone for its handsets. In 2010, the company launched its first Android smartphone in China and called it the "LePhone." Since then, the company has expanded its smartphone profile, with dozens of different devices, and even hired NBA basketball player Kobe Bryant to promote its handsets.

But despite Lenovo's success in China, the company's smartphone business needs to expand internationally in order to sustain growth, said CK Lu, an analyst with research firm Gartner. About 97 percent of all Lenovo's smartphone sales come from China, he said.

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