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Is Lenovo Catching Up With Samsung and Apple?

August 07, 2014 | About:
ICRAOnline

ICRAOnline

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Lenovo (LNVGY), the world’s famous PC maker, has taken strides to move into newer products and markets to keep pace with growing competition. Since early 2012, the Chinese multinational technology firm entered the smartphone business and has created various Android devices since then. Quite remarkably, Lenovo has been successful in making its mark in the smartphone sector, where it currently holds the fourth global position as per market research firm IDC’s estimates.

Lenovo’s smartphones do come with a cheaper price sticker compared to devices from Samsung (SSNLF) and Apple (AAPL), its core rivals in the sector, and sells mostly at its home turf. Lenovo’s management has expressed their interest to surpass these two biggies several times in the past. Now the time is ripe to watch as to how Lenovo is gradually catching up to these tech giants. Let’s find it out in the upcoming sections.

Lenovo’s brisk growth pace

Lenovo’s market share in the smartphone sector for the third quarter of 2013 was 4.9%, up from 4.1% registered in the same period in 2012. That was really tiny when compared with Samsung’s 28.8% and Apple’s 17.9% during the same period. However, interestingly Lenovo’s shipments jumped 50% in the same quarter of 2013 despite having almost no presence in North America and Western Europe.

To better its smartphone sales of this year, the Chinese player set up a production, sales and R&D complex in central China in December that is completely focused on manufacturing of tablets and smartphones.

The fourth quarter of Lenovo’s previous fiscal year, which ended on March 31, saw an increase in smartphone and tablet shipments standing at 50 million and 9.2 million respectively. China contributed to about a third of its smartphone global sales in the fourth quarter, and analysts were expecting Lenovo to close the gap with Samsung in the Chinese smartphone market very soon.

Also recently, Lenovo has bought Motorola from Google (GOOG) for $2.91 billion and soon after the acquisition Lenovo’s CEO Yuanqing Yang, in an interview with Fortune, spoke about his plans to overtake his biggest competitors – Samsung and Apple. He emphasized that, with this acquisition in place, Lenovo has become the third-largest global smartphone vendor and that his company’s mission still remain unaltered – "surpassing Samsung and Apple."

The acquisition offers better global footage

Though China’s fast-growing smartphone market has fueled Lenovo’s handset sales growth over the past few years, there are concerns that this momentum might see a gradual fall over the coming quarters. While such a scenario prevails at the home turf, Google's Motorola offer to Lenovo is an ideal opportunity to access the U.S. smartphone market and build its smartphone and mobile brand outside China.

As Motorola is an established global brand with a product portfolio tapping into all price segments, it perfectly fits into Lenovo's strategy. Motorola's Moto X, Moto G and the DROID Ultra series might as well bolster Lenovo's product pipeline and aid in competing with the tech majors.

Way back in 2005, Lenovo had done something similar to gain a strong hold in the PC market when it purchased IBM's PC business to expand its PC offerings in China and gain customer confidence in the U.S. market. With the help of IBM’s ThinkPad brand and well-knit distribution channels, Lenovo did easily surpass Hewlett-Packard and Dell to become the largest seller of personal computers.

Following the same road for success, the acquisition of Motorola will supply Lenovo with strong retailer relationship to connect with end-users in North America and Western Europe where it requires building a solid base. This could aid in beating the technology leaders at one go and grab the global top position in the smartphone market. Lenovo’s CEO rightly stated,

“the acquisition of such an iconic brand, innovative product portfolio and incredibly talented global team will immediately make Lenovo a strong global competitor in smartphones.”

The Chinese tech player wishes to sell 80 million smartphones in the coming year.

Lenovo entering new markets

Lenovo first introduced its smartphone range in the UAE and Saudi Arabia last year by launching six new models in the region. Since then, it has launched models such as Vibe X and the first LTE smartphone, the Lenovo Vibe Z which have appealed to many in the region. Lately, the Chinese firm has announced the launch of the latest smartphone in its flagship VIBE series, the Lenovo VIBE Z2 Pro in the region by this September.

Such continued introduction of new products in new markets will drive Lenovo’s global smartphone market share further, which as per IDC report has increased to 5.4% during the second quarter of 2014, up from 4.7% during the same period last year.

Final word

Having mentioned that the management is eagerly waiting to surpass Samsung and Apple within the next two years, only time can tell if Lenovo will be able to build its base rapidly in North America and Western Europe – these regions contributing to more than half of Apple’s and Samsung’s smartphone sales in almost every quarter. Lenovo has to walk a long path and could face certain hurdles as well in its venture, since the top honchos are also continuously upgrading their products to keep themselves ahead of competition.


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