What you should know about Lenovo’s Motorola acquisition

30 Oct 2014 | Author: | No comments yet »

Lenovo Won’t Stop at No.3 in Smartphones After Motorola.

China’s Lenovo finally has the global smartphone presence it has craved, finalizing the purchase of Motorola Mobility from Google for US$2.91 billion. The transaction, which left most of Motorola’s patent portfolio with Google while Lenovo received a license to the intellectual property, would make the Chinese company “a global player,” Lenovo Chief Executive Officer Yang Yuanqing said when announcing the purchase in January.

Chinese giant PC producer Lenovo has completed the $2.9 billion acquisition of the handset unit in the iconic mobile maker Motorola Mobility, fortifying its positions in the US and other developed markets. Lenovo, which announced the closing the phone maker’s acquisition from Google this morning, has no intention of losing money on its bold bid to take share in the smartphone business.

Lenovo hopes to unseat the likes of Apple and Samsung, and has an ambitious goal of shipping 100 million devices, including PCs, tablets and smartphones, by the end of March next year. Lenovo boosted global smartphone shipments by 38 percent in the third quarter to 16.9 million units, ranking it fourth worldwide, International Data Corp. said Oct. 29.

Retaining brands is important to expand market presence until a long-term product strategy is devised, said Liu Jun, president of Lenovo’s Mobile Business Group. Samsung, based in Suwon, South Korea, remained the world’s largest smartphone vendor, with 23.8 percent, followed by Cupertino, California-based Apple with 12 percent, IDC said.

Motorola’s sales in Asia, Latin America and the U.S. would have boosted Lenovo’s global ranking to third in the period, Kiranjeet Kaur, a Singapore-based analyst at IDC, said yesterday. Motorola’s Moto X, G and E smartphones are attractive because of their prices and the bloatware-free versions of Android that receive quick OS upgrades.

Lenovo has made inroads beyond China, with international markets accounting for 20 percent of third-quarter smartphone shipments in compared with 9 percent a year before, IDC said. The Motorola purchase included a $1.41 billion payment in cash and Lenovo stock at closing, with $1.5 billion to be paid in a three-year promissory note, Lenovo said in a statement yesterday. Motorola added 21-megapixel cameras to its Nexus 6 and Droid Turbo smartphones introduced this month, so it’s possible Lenovo may put those features in its high-end Vibe smartphones. Motorola also has developed algorithms to adjust smartphone behavior based on background sounds, locations and user behavior, which Lenovo could bring to its smartphones.

With rising industry competition, and continued losses at Motorola, integrating the two companies may not be as easy or smooth as Lenovo expects, Strategy Analytics’ Mawston said. The Motorola closing completes $5 billion in acquisitions Yang announced in January, following the Oct. 1 completion of the $2.1 billion purchase of International Business Machines Corp. (IBM:US)’s low-end server unit. “We just spent $5 billion,” Yang said. “If we want to spend more, we must make more first. Moreover, the company is transparent in its business activities, and has a solid track record of selling tablets and PCs worldwide, Lenovo executives said. Not only does Motorola bring with it rights to a broad portfolio of patents (Google retains ownership, but has granted Lenovo a broad license), but Moto also has a strong and complementary set of brands that will fit well with Lenovo’s existing smartphone business. In adding Motorola Mobility to its portfolio, Lenovo completes a set of acquisitions that began with IBM’s PC group in 2005 and extended to IBM ’s x86 server business earlier this year.

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