While Chinese technology giant Lenovo is still waiting on final approvals to come through on its deal with Google to acquire phone manufacturer Motorola, it has already started releasing plans on what it will do with once the deal concludes later this year (execs are betting on everything being done and dusted in the next three months).
Yesterday, Lenovo confirmed that it will pursue a dual-brand strategy in markets where the Lenovo brand doesn’t have a strong name in smartphones, but Motorola does. Details on what it’s planning to do on a region-by-region basis however have been really thin on the ground until now. It’s assumed that Lenovo will lead with Motorola in the developed world. The emerging market is less cut and dry however.
South African plans
When asked about South Africa specifically, Liu Jun, Lenovo’s executive vice president and president of Lenovo’s mobile business group said that South Africa is an important market for the company, but a very different one.
He said that South Africa fits into the Middle East and Africa (MEA) region, but is different from many countries in this region. Liu says that he sees it as the only market in MEA that is mature in terms of the carriers and vendors in the market.
“We will build a firmer plan for South Africa after we’ve officially closed the deal with Motorola, but our current thinking is that we will leverage the Motorola brand when we enter that market,” Liu says.
Globally, the deal will give Lenovo increased access to operators and increased revenues. Its relationships will increase from just over 10, to well over 50 with Motorola bundled in.
How the deal went down (behind the scenes)
Liu spoke in some detail about the firms strategy to aggressively push smartphones globally, and how the Motorola deal has accelerated its plans to expand from its core bases in China and Russia across the world.
“The plan was global from day one,” he says.
“Lenovo’s first approach to acquire Motorola was when Google announced its acquisition of Motorola. We felt that Google shouldn’t be in the hardware business because it’s an ecosystem player. We believed that Google was after the IP contained in Motorola and that we had an opportunity to acquire the hardware business.
“We approached Eric Schmidt and had a good discussion about it. Google wanted to try the hardware tack however. About a year and half after that however they reconsidered their strategy, ” he said.
Liu says that Lenovo’s CEO, Yang Yuanqing received a call from Schmidt towards the end of last year enquiring whether Lenovo was still interested in the hardware business. Yang obviously expressed huge interest, Liu said.
Lenovo’s response was so positive in fact, Liu said that it took no more than three to four months for it to finalise the contract to acquire the hardware business from Google.
Some details emerge
Liu was revealing about the fact he explicitly plans to reverse some decisions made by Google. For example, he says, Lenovo will reinvest in a number of Motorola’s sales and research and development centres around the world.
“We believe the Research and Development is one of the most valuable assets the acquisition has to offer,” Liu said, “After take over, we will maintain the current (albeit reduced) teams around the world and probably set up new sites in other countries rather quickly.”
Another big question right now is what Lenovo and Motorola will do for smartwatches, glasses and other so-called ‘wearables’. Liu said that Motorola has already received very positive feedback from the market on its 360 smartwatch. The firm is preparing to announce new wearables at CES next year.
There is, however, a big question around how Lenovo will return Motorola to profitability in mature markets where the lion’s share of cash goes to Apple and Samsung.
Liu said that Lenovo’s smartphone business is profitable in the emerging markets it operates in right now, but acknowledges making money in the US and Europe will be a challenge.
“We have however seen some categories of the mature markets where opportunities exist, such as the prepaid and unlocked phone space, where more profitability exists. And we’ll be targeting those,” he said. “We believe that Motorola has the right product portfolio to be successful, but not the scale right now. With better cost controls and scale, we believe it can make money, even in the mature market.”
As a parting shot, Liu commented on mobile operating system and more specifically, Lenovo’s plans for Windows Phone.
“The smartphone industry is 80% Android right now, but we believe that Windows Phone will get a piece of it. It has an opportunity in the commercial space. To that end, Lenovo plans to launch a Windows Phone this year,” he said.
We’re out in China visiting Lenovo’s factory installations now. More details on the Motorola plans are trickling out in dribs and drabs. I’ll post further updates as and when they do.