Failed to make the acquisition of IBM's successful experience Lenovo's mobile phone at a turning point

【Global Science and Technology Report】 "Japanese Economic News" reported on March 29 that Lenovo seems to have reached a point of salutation. As a new business outside of the fast-growing personal computers, Lenovo has promoted acquisitions in the smart phone field, but the mobile phone business in October and December 2016 has suffered a loss, and there is no possibility of a reversal. Lenovo has had successful experience in acquiring IBM's personal computer business in the United States, but it has not played this experience in the smart phone field. What will Lenovo's Lenovo fall into?

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At the "Mobile World Congress", the world's largest mobile product trade show held in Barcelona, ​​Spain in early March, Lenovo's president and CEO (Yang Yuanqing) mentioned that he wanted to start from scratch and expressed his determination to revive the smart phone business.

Just three years ago, when Lenovo acquired the Motorola mobile phone business in 2014, Yang Yuanqing also expressed with confidence that Lenovo will become a powerful global company in the rapidly growing smart phone field. Yang Yuanqing bought Motorola's first mobile phone, and he personally came forward for the acquisition negotiations. However, the decision to acquire Motorola from US Valley singers for approximately US$2.9 billion may seem counterproductive.

Yang Yuanqing believes that Lenovo’s mobile phone business is strong in China and other emerging market countries with low prices as the center, and it can complement Motorola, which has strong brand strength in developed countries. As part of the “PC+” strategy led by Yang Yuanqing to cultivate business pillars outside of personal computers, Lenovo has strengthened its smartphone business, and its global market share in 2014 has risen to third place.

Failed to persist without interfering

However, the seemingly beautiful future soon faded. In Lenovo’s base camp in China, the sales of mobile phones have fallen into a downturn, and sales in the United States and Brazil, where Motorola dominates, have also rapidly declined. In FY2015 (as of March 2016), Lenovo’s pre-tax loss of the smartphone business was US$469 million, which was the main reason for Lenovo’s final loss in the seven financial years. In October-December 2016, Lenovo's smart phone business reduced its turnover by 23% and made a pre-tax loss of more than US$100 million.

Lenovo's acquisition of personal computers (M&A) has been successful. Why is it frustrating on smart phones? A former executive analyzed that “the key to personal computer success is the importance of local needs and the thorough implementation of non-interventionism, and we have failed to adhere to these two points in the smart phone business.”

Lenovo’s actual founder and chairman of the parent company Legend Holdings, Liu Chuanzhi, pointed out that do not indulge in technology, but pay attention to customers and regions. When acquiring IBM's personal computer business, Lenovo only introduced its own mechanism to IBM at least, and all the stocking and business strategies were handed over to the local authorities. When it merged with NEC's personal computer business, it also adopted the business strategy that meets the needs of Japan and occupied Japan’s first market share. In addition, there is hardly any dispatch of talent from China to Japan.

Responsive to the customer's voice sensitivity deep in the association's DNA. Not only is it technically powerful, Lenovo has also emerged in the budding Chinese personal computer industry with its strong sales capabilities.

But how does Lenovo perform on Motorola's business? According to related sources, directors from the personal computer department have attached great importance to launching new smart phones in China. Affected by design, etc., it will be a bit too late to invest in overseas markets. In China, Motorola's brand strength is also lower than expected and sales growth is slow. Another point of view pointed out that the executives of the mobile phone business are frequently replaced and the internal organization is chaotic.

According to data from the Beijing Qunzhi Marketing Consultancy, a survey company in China, Lenovo’s share of smartphone shipments in the Chinese market recently reached the peak of 14.1% in 2013, and dropped to 1.6% by 2016. In order to achieve recovery, Lenovo has cut its product categories in China and sales of smartphones have also been affected by this move.

In addition, Lenovo also conducted a "big shake-up" for executives, and recently used four vice presidents in one breath. They are Ma Daojie who has developed a smart phone business in China Telecom Group, Jiang Zhen, who is engaged in development in South Korea's Samsung Electronics, Zhu Han, who has had business experience in TCL Group, and the embarrassment of being a member of China Mobile Group.

Return to the computer?

Analysts familiar with China’s IT industry pointed out that “It is not easy for Yuanguang to replace the senior executives in the highly competitive smart phone market. Lenovo is best to return to the personal computer business and consolidate its foothold”.

Lenovo is negotiating with Fujitsu to acquire personal computer business, and there are rumors that it will acquire Samsung's personal computer business. Yang Yuanqing said that many companies are considering exiting the personal computer business. We must seize this portion of the market share.

Although it seems to be a strategy for returning to the personal computer business, it is still impossible to describe the future of Lenovo. At the forum held in Beijing on March 18, Yang Yuanqing emphasized that through the era of personal computers and smart phones, the age of intelligent networks, such as artificial intelligence and big data analysis, will soon be welcomed. In order to realize this vision, Lenovo's next move has attracted much attention.

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