Lenovo, The next Samsung?

Although China controls the world economy and is the world leader in exports, if I ask you to name a Chinese Company that is a big brand globally, I am sure it would keep you thinking. Not many would know that Lenovo is a Chinese Multinational with its products being sold in more than 160 countries. By the end of 2013, Lenovo had crossed HP, Dell and Apple to be the largest seller of personal computers in the World. Lenovo entered the smartphone market in 2012. As of 2014, it is the largest seller of smartphones in China and the fifth largest in the World. It is now aggressively heading towards capturing the smartphone market worldwide.

The company is now in the headlines for its decision to acquire ‘Motorola Mobility’ from Google. It is a $2.91 billion deal which includes the Motorola brand, 2,000 patents and trademark portfolio. With the announcement of the deal, Google has bought 5.94% stake in Lenovo for $750 million. It includes 618.3 million Lenovo shares at $1.213 per share.

Google had acquired Motorola Mobility in 2011 for a whopping $12.5 billion. The heavy amount for the declining Motorola was paid for the 17,000 patents related to mobile handsets that they possessed. Hence, Google has still kept majority of the patents with themselves to defend their entire android ecosystem.

Lenovo has undertaken this major acquisition to gain recognition in smartphone industry. Although it is a big brand in laptops, computers and tablets, people would hesitate to buy a Lenevo smartphone when they had options like Samsung, Sony and Apple. Hence, to compete with these big established players beyond China was a major challenge. All they lacked is a brand name in smartphones and trust amongst people in terms of quality and service. Now, with this acquisition they have the Motorola brand, which may not be doing well today, but was once the pioneer in the mobile industry.  Motorola owns the privilege of inventing the first mobile phone, and the brand still reminds of quality and durability. The Lenovo brand talks of innovation and design. According to me, this is indeed a great mix to hit the smartphone industry.

Lenovo has a similar history in personal computers. Back then in 2005, Lenovo was comparatively a smaller brand, more prevalent in China. IBM’s CEO Samuel Palmisano wanted to move IBM’s business from their traditional hardware production to new unique businesses with high profit margin and potential for innovation. Basically, he wanted to shift IBM operations from hardware production to providing software solutions. He acquired many software companies and announced to sell IBM’s division of computers and laptops. Lenovo seized this opportunity and acquired IBM’s hardware production division including its computer and laptop brands. This move proved to be their license to rapidly capture the foreign markets, mainly USA because of the IBM brand name. And with a steady progress it took them just 8 years to become the World’s largest seller of computers and laptops.

Lenovo is quite capable excelling in smartphones just as it did in computers. And now that Google owns a stake in Lenovo, the probability is even more. Google may prefer Lenovo for launching new Android versions and introducing latest updates. We may also expect the next Nexus to be a Lenovo model.

In India, Sony and HTC have miserably lost their market share. Indian brands like Micromax, Lava and Karbonn are not preferred by the upper middle class category. The only option available is Samsung, which is owned by every other individual. In this scenario, if Lenovo emerges as a big brand worldwide, with its better looks and features, it would definitely give Samsung a tough fight.

Samsung is undoubtedly the worldwide market leader in smartphones. Lenovo is new in the segment. It would take time to penetrate in the markets, to gain people’s trust and emerge as a brand. But over the years, it surely has the potential to be the next Samsung.