China’s Lenovo has sealed its deal with Google to buy Motorola Mobility and its Android-powered smart phones. Now it has to figure out a strategy to make the division profitable in a highly competitive industry where Apple and Samsung are reportedly the only manufacturers making money — and Samsung is making less (see below).
In a conference call with reporters and industry analysts this morning. chairman and CEO Yang Yuanqing was confident it can be done in less than two years. “Financial results are significantly improving, losses are down, revenue is up,” he said.
Before the deal closed he had said Motorola’s goal is to sell 100 million handsets by end of March 2015. “We are certain we will achieve this target … As Motorola benefits from Lenovo’s operational excellence and global reach, we are confident that the business can become profitable in four to six quarters.”
Asked bluntly about buying BlackBerry, he drew laughs saying he had to ask the CFO if there is money to do another deal, after not only inking the Motorola sale but also buying IBM’s x86 server business this month. While the company looks at all opportunities, an executive said, “as far as a very specific question we are not in a position to comment.”
Yang Yuanqing said that integrating the IBM and Lenovo teams will take a lot of effort. “If we want to do another big deal we will have to make a lot of money from the integration.”
Financially-troubled BlackBerry had been looking for either a new owner, a major shareholder or a company to take over manufacturing of its handsets. However, since CEO John Chen took 12 months ago, he has dampened reports the company is being shopped around.
While some Western governments — including Canada, the U.S. and Australia — have express concerns about their departments buying telecom switching equipment from Chinese manufacturers, he said that no one should have worries about Motorola devices. “We have approvals from many governments (for the acquisition), including U.S. and China … we are a trusted company, they supported the deal. We don’t think we have any issue in any market of the world. Lenovo is viewed as a transparent company, a trusted company. We are not a Chinese company, we are a global company. We have a very diverse membership on the board as well as the management team. Wherever we do business we will comply with regulatory requirements.”
Analyst firm Technology Business Research Inc. thinks Lenovo is on the right track. In a commentary analyst Jack Narcotta argued that it will now throw a broader array of devices targeted at budget-minded customers, who are increasingly buying these devices at full price (in some countries the Moto-X can be had for US$400) and signing up for discounted, contract-free service plans.
But it will have to do something to get the attention of carriers here: At the moment Rogers, Bell and Telus each list only one Motorola handset on their Web sites.
On the conference call executives didn’t talk about future devices now that Motorola is in new hands. However, Motorola Mobility president Rick Osterloh noted that Lenovo is the number three manufacturer in the world in tablets, adding that “we’re very excited about the future possibility of working on tablets together.”
He also said he’s elated about the possibility of using Lenovo channels to sell Motorola Mobility products, and Motorola channels to sell Lenovo products. “That’s the most exciting synergy in this deal,” he said.
The Motorola brand will continue to be used in Canada, the U.S. and Europe.
Lenovo just signed the papers to finalize its purchase of IBM’s x86 business, allowing the CEO to Lenovo now can compete across the entire device portfolio from PCs to infrastrcutre and cloud services.
According to just-issued figures from IDC, in the third quarter of this year Lenovo was the number four smart phone manufacturer in the world (not including Motorola numbers) with 5.2 per cent of the market, behind China’s Xiaomi with 5.2 per cent. Apple was second with 12 per cent while Samsung Electronics was number one with 23.8 per cent.
Meanwhile, Samsung reported this morning its third quarter profits dropped largely because of fierce competition in China from Xiaomi, Huawei, Lenovo and others, Fierce Wireless said. Mobile operating income fell 74 per cent year over year. The average price of its smartphones also dropped.
