3 Reasons Lenovo's Purchase of Motorola Will Succeed Where Google Failed

Google (NASDAQ: GOOGL  ) just sold Motorola Mobility, one of its worst acquisitions ever, to Chinese tech giant Lenovo (NASDAQOTH: LNVGY  ) for $2.9 billion -- a steep discount from the $12.5 billion it had paid for the company back in August 2011.

Lenovo gets the entire Motorola brand, including the recently launched Moto X and Moto G handsets, as well as more than 2,000 patent assets. Google, however, will retain the majority of the Motorola's original patent portfolio.

Moto G (L) and Moto X (R). (Source: Blogscomputerworld.com)

This is a humbling move for Google and a thrilling new development for Lenovo, which has grown into the world's largest PC manufacturer through the acquisitions of IBM's (NYSE: IBM  ) personal computer and low-end server businesses, leaving Hewlett-Packard (NYSE: HPQ  ) in the dust.

There are doubts regarding Lenovo's ability to revive the Motorola brand, which at its peak (2006) accounted for 22% of the mobile phone market, but I truly believe that Lenovo will do a much better job than Google at rebuilding the fallen brand's reputation in the mobile marketplace.

Let's take a look at the three top reasons:

1. A solid reputation of transforming brands

We're all too familiar with Hewlett-Packard's excuse for its poor performance over the past three years: the rise of smartphones and tablets have turned its traditional business model of personal computers upside down.

While it's true that global PC shipments fell 10% year-over-year in 2013, Lenovo has survived unscathed:

Company

Global market share (4Q)

YOY growth in shipments

Lenovo

17.1%

2.7%

Hewlett-Packard

16.6%

(10.3%)

Dell

12%

(2.4%)

Acer Group

7.6%

(28.5%)

Source: IDC.

IDC's numbers strongly indicate that Lenovo's gains in a shrinking market were made at the expense of its rivals. Therefore, although PCs might not be that appealing anymore, Lenovo's products -- especially its hybrid devices -- are still winning over customers.

None of this would have been possible if it weren't for Lenovo's 2005 acquisition of IBM's personal computer business for $1.25 billion, which added IBM's iconic ThinkPad brand to its portfolio.

Lenovo's ThinkPad Yoga. (Source: Lenovo)

Over the years, Lenovo transformed the ThinkPad brand from a stodgy line of business laptops into a fresh line of hybrid devices, convertible laptops, and tablets -- most of which were well received commercially and critically:

Product

Release date

Form factor

CNET rating

ThinkPad Yoga

2013

Hybrid

4/5

ThinkPad Twist

2012

Hybrid

4/5

ThinkPad Helix

2013

Convertible

3.5/5

ThinkPad Tablet

2011

Tablet

3.5/5

ThinkPad Tablet 2

2013

Tablet

3.5/5

Yoga Tablet

2013

Tablet

2.5/5

Sources: Cnet.com.

Lenovo also put its entire line of traditional laptops through the redesign blender from 2012 to 2013, in an effort to streamline its designs and make them more appealing to business users. In other words, whereas Apple (NASDAQ: AAPL  ) tried to make consumer electronics cool again, Lenovo tried to make business laptops more aesthetically pleasing.

Therefore, it's reasonable to assume that Lenovo has a similarly ambitious plan in mind for Motorola that could dwarf Google's Moto G and Moto X efforts.

2. An established footprint in mobile hardware

According to IDC, Lenovo is currently the fourth largest smartphone maker in the world, with a 4.9% share of the global market, up from 4.1% a year earlier.

Combining its share with Motorola's tiny sliver of the market bumps Lenovo share up to 6.4%, making it the third largest manufacturer after Samsung (NASDAQOTH: SSNLF  ) and Apple.

Lenovo's K900 Android smartphone. (Source: Lenovo)

Although Lenovo's share is still dwarfed by Samsung's 28.8% and Apple's 17.9%, shipments of its mobile devices surged 50% year-over-year last quarter.

Lenovo is the only major Wintel PC manufacturer that has successfully dented the smartphone market. Previous efforts by Hewlett-Packard, Dell, Acer, and Asus have failed due to poor designs, bad market timing, or poor marketing efforts. Lenovo's smartphones succeeded for two simple reasons -- they arrived fairly early (2009) and went with Android.

Lenovo smartphones aren't widely used in the U.S., but they account for 11.8% of China's lucrative smartphone market, putting it ahead of Apple (6.2%) but behind Samsung (21.2%).

Claiming the well-known Motorola brand could help Lenovo finally grow its U.S. smartphone market share as well.

3. Marketing muscle and celebrity wattage

Lenovo also has the marketing muscle to succeed where Google failed.

Google's $500 million U.S. marketing blitz for the Moto G and X yielded mixed results, including the bizarre "Lazy Phone" ads and some sexually charged ads encouraging people to "touch each other" instead of their phones.

Google's clumsy ads looked much sloppier than Apple's minimalist approach and the crisp and catchy "Hello Moto" ads that Motorola was once known for.

Lenovo, by comparison, has hired both Kobe Bryant and Ashton Kutcher as its spokesmen.

Lenovo even gave Kutcher a real role as a product engineer at Lenovo, where he offers hardware and software design advice. Regarding the role, Kutcher stated that he wanted to help make Lenovo's "products as consumer-friendly as possible."

Ashton Kutcher channeling Steve Jobs as Lenovo's new product engineer. (Source: Businessinsider.com)

It's a gimmicky but inspired choice, considering Kutcher's own interest in tech investments and his recent role as Apple founder Steve Jobs in Joshua Michael Stern's biopic Jobs.

By hiring Bryant and Kutcher, it's clear that Lenovo wants to be identified as a mainstream U.S. company. Now, with a more recognizable brand like Motorola under its belt, Lenovo will put much more effort into its marketing efforts than Google ever did -- and that could finally make Moto relevant again.

The bottom line

Looking forward, will Lenovo follow through with Google's strategy of only marketing a lower-end handset (Moto G) and a higher-end one (Moto X), or will it split the brand into a wider range of phones, similar to the strategy employed by countless other Android handset manufacturers?

One thing remains certain, however -- Lenovo's acquisition of Motorola could shake up the handset industry the same way its acquisition of IBM's personal computer business did to the PC market. Just as HP and Dell eventually yielded to Lenovo in the PC arena, so could Apple and Samsung in the smartphone race over the next few years.

What do you think, dear readers? Will Lenovo succeed with Motorola where Google failed? Please share your thoughts in the comments section below!

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  • Report this Comment On February 01, 2014, at 3:00 AM, Klaus001 wrote:

    From what I can judge, Lenovo's strategy thus far has been to buy into mature technologies at non-peak prices after First World peak demand has been reached. In this way, it saves on the extortionate cost of developing new technologies.

    It then sells its acquired technologies in maturing / emerging markets, where QUANTITY RATHER THAN PROFIT MARGIN drives in the cash. The profits are then reinvested in improving existing, rather than designing new, technologies until the respective product cycle draws to a close.

    After that, the process repeats itself, but with each cylce, Lenovo increasing its global footprint.

    Lenovo has self-confidence in maturing markets, but seems to continue to circle its prey when it comes to Europe/America, still carefully assessing the best strategy to take on the unknown beast following William Amelio's departure in 2009.

    Certainly the Motorola acquisition would appear a prudent step towards back-door market entry (similarly to Lenovo's acquisition of Medion in Germany).

    With difficult economic conditions, there may also come a time when even (currently) wealthy Westerners start asking the question: can we afford a new and classy, but costly iPhone, or can we make do with a cheaper Motorola phone with similar functionality?

    Conclusion: I am optimistic about Lenovo's chances of making Motorola, not a mega-money-spinner but, a strategic purchase to increase its global market footprint in the Western world.

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