January 29, 2014
Lenovo’s made three strategic moves in just one month: 1) Buying IBM’s x86 server business, 2) Reorging into four business units – most importantly including one called “ecosystem and cloud group”, and 3) Buying Motorola Mobility. The later two are driven by the mobile mind shift – the increasing expectation of individuals that they can access information and service, in context, in their moment of need. Smartphones are central to that – as are the ecosystem and cloud services that deliver value through the smartphones.
Lenovo has stated intentions to become a leading smartphone maker globally, building on their leading position in the China market. Buying Motorola Mobility is a much quicker way for Lenovo to access the premium smartphone market with a leading Google Android (not forked Android) offering – than trying to do it with their existing design teams and brand reach. Using Motorola, just as Lenovo used the IBM ThinkPad brand, to gain quick credibility and access to desirable markets, and built critical mass makes a lot of sense.
But Motorola has not been shooting the lights out with designs or sales volumes in smartphones. So the value is simply in brand recognition to achieve market recognition faster – and to dramatically expand the design and marketing team with talent experienced at US and Western markets.
Given Lenovo's ambitions to grow quickly in smartphones and become a top 3 global player, buying one or more established brands makes a lot of sense. And the list of accessible companies is short – the only other ones that come to mind are LG and HTC, both with less history and brand affinity in the US or Europe. Blackberry is less interesting because of the unique OS and the national security challenges, while the Chinese makers such as ZTE, Xiaomi, and others don't make sense for accelerating presence in mature, wealthy economies. Samsung won't sell, and Huawei won't either sell either – and can't help in the West.
So Motorola looks like a really appealing option for Lenovo.
Note that this puts Lenovo in position to have leading offerings in smartphones, tablets, and PCs – a vital tri-fecta that no other global manufacturer has – besides Apple.
This is very important because over the next five years buyers will increasingly think in terms of consolidating their purchases to one digital platform/online ecosystem (Microsoft, Apple, Google, Amazon) and likely to one hardware maker, if that maker can deliver services and experiences that enhance and differentiate the hardware. The first step is the one that Microsoft took last year – offering PCs, tablets, and smartphones. But unlike Microsoft or Apple, Lenovo is a market leader in PC units – and has a premium PC brand in Thinkpad. Like all PC makers they've struggled to get traction in tablets but they're credible there – and now they have a global smartphone brand and team,with an excellent premium smartphone in the Moto X, plus a mainstream offering in the Moto G, and with DROID.
This makes Lenovo a company to watch – and puts HP, Dell, Samsung, Sony, Acer, Asus, and Toshiba on notice. The personal device manufacturer business is consolidating – and manufacturers must compete in all three device markets, plus emerging wearable categories, or get left out of the next market shift.