Lenovo’s struggling cell enterprise units sight on high-end market

HONG KONG (Reuters) – After a bruising fall from its spot because the world’s third-largest cell phone maker following its acquisition of Motorola three years in the past, China’s Lenovo Group Ltd 0992.HK is relying on a push upmarket to cease the bleeding in its smartphone enterprise.

FILE PHOTO: Lenovo tablets and cell phones are displayed throughout a information convention on the corporate’s annual leads to Hong Kong Might 23, 2013. REUTERS/Bobby Yip/File Picture

Whereas the corporate, which vies with HP because the world’s largest PC maker, returned to revenue within the 12 months to March, losses in its smartphone enterprise worsened as advertising bills for brand spanking new merchandise and key element prices elevated.

The group’s cellphone issues began after it acquired Motorola Mobility from Google for $2.9 billion in 2014 however struggled to combine the property. That, mixed with fierce competitors from lower-end producers in its dwelling base of China akin to Xiaomi and Oppo, noticed its international place fall to eighth in 2016.

A lately introduced reorganization of its China enterprise geared toward sharpening the PC model’s shopper focus comes amid an ongoing effort to tighten its cell branding and shift the main target to pricier fashions beneath its Moto model.

“Our technique is to prioritize mature markets … which want manufacturers and progressive merchandise, whereas rising markets want effectivity,” Chairman Yang Yuanqing mentioned of Lenovo’s cell enterprise at a press convention in Hong Kong on Thursday.

“So we could have two groups catering to the 2 sorts of markets with completely different product strains.”

Lenovo faces its hardest battle in its dwelling base of China, the place it has slipped out of the highest 10 smartphone distributors. Shipments domestically declined 80 % year-on-year or 55 % quarter-on-quarter within the first quarter of 2017, in keeping with information from Canalys.

The corporate at present has three cellphone manufacturers in China – the premium Moto model, the cheaper Lenovo collection, and an online-focused ZUK model launched in 2015.

A Lenovo spokeswoman mentioned its international cell technique would deal with the Motorola model, though it could proceed to assist its different strains, akin to ZUK.

Moto merchandise, together with a premium collection of modular telephones designed with removable elements that may be changed or upgraded, helped propel Lenovo to be the second-biggest vendor in Brazil, after Samsung Electronics Co Ltd 005930.KS, Yang mentioned.

Shipments in Brazil rose 56 % within the first three months of the 12 months in keeping with Lenovo, overtaking India as its largest market, the place quantity grew 34 %.

The common promoting costs of Lenovo’s cell merchandise rose 15.1 % previously 12 months, in keeping with its monetary report.

Mature market competitors, the place Yang mentioned Lenovo’s foremost rivals are Samsung and LG Electronics Inc 066570.KS, is much less fierce than in rising markets, the place the low entry barrier allowed in “too many Chinese language distributors, a few of which compete irrationally”.

He added Lenovo could have three extra telecom companions within the U.S. this 12 months, whereas its efficiency in Western Europe is enhancing.


Yang mentioned Lenovo is on observe to fulfill its objective of turning across the cell enterprise by the second half of the fiscal 12 months beginning in April.

On the identical time, some analysts say the corporate ought to lower its cell losses in China and deal with constructing its power in different markets.

“I believe they need to deep-six their China cell enterprise. Their non-China most likely has an opportunity if it’s very narrowly geographic and product targeted,” mentioned Bernstein analyst Alberto Moel.

Lenovo is the fourth-biggest smartphone vendor in India, with a 9.5 % market share, which compares with Samsung in high place with 28.1, in keeping with IDC.

Whereas it faces growing competitors from new entrants Oppo and Vivo, it enjoys good model loyalty.

“I like Lenovo telephones for his or her good battery backup, good appears to be like and the general expertise,” mentioned Bhaskar Kotian, a Mumbai businessman who has bought at the very least six Lenovo smartphones for family and friends previously two years.

Regardless of calls to write down off its China issues, Yang insists there aren’t any plans to stroll away from its home cell enterprise.

“We’d by no means quit our China cell enterprise, as a result of it’s 30 % of the world market,” he mentioned.

(This story corrects to repair typographical error in headline.)

Reporting by Sijia Jiang; Extra reporting by Sankalp Phartiyal; Enhancing by Sam Holmes

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