Weak de­mand is hurt­ing Len­ovo

China Daily (Canada) - - BUSINESS - By GAO YUAN and LIUKUNinWuhan

Slow­ing smart­phone de­mand in China is weigh­ing on Len­ovo GroupLtd’ssale­sas­the­com­pany sprints to catch up with Ap­ple Inc and Sam­sung Elec­tron­ics Co Lt­din the­hand­set seg­ment. On Thurs­day, Len­ovo re­ported third-quar­ter rev­enue growth that fell be­low mar­ket ex­pec­ta­tions, send­ing down­its share prices and cloud­ing ex­pec­ta­tions for the fu­ture prof­itabil­ity of the world’s largest per­sonal com­put­er­maker.

Glob­al­rev­enue­wa­sup7.2per­cent to $10.5 bil­lion, the small­est in­crease in at least six quarters.

Quar­terly set­backs did not hurt Len­ovo Chair­man and Chief Ex­ec­u­tive Yang Yuan­qing’s at­tempt to build the mo­bile de­vice seg­ment into a new­cash cow to re­place the PC business, which pro­vided a decade of prof­its.

“We will repli­cate our suc­cess in PCs by out­grow­ing the mar­ket to chal­lenge the top two. Mo­bile and en­ter­prise busi­nesses arenowour new­growth en­gines, an­dover­time, likePCs, they­will­be­comeour­profit pool as well,” Yang said.

Len­ovo hopes that Mo­torola Mo­bil­ity will help it un­lock de­vel­oped mar­kets in Western Europe and North Amer­ica. The company said last month that it com­pleted a $2.91 bil­lion buy­out of Mo­torola Mo­bil­ity from Google Inc. Ac­cord­ing to re­search firm IDC, the ac­qui­si­tion helped Len­ovo to be­come the world’s third-largest smart­phone ven­dor with an 8.7 per­cent mar­ket share, after Ap­ple and SouthKorea’s Sam­sung.

Chal­lenges still loom forLen­ovo in the com­ing quarters.

Chris Jones, vice-pres­i­dent of in­ter­na­tional re­search company Canalys, said: “The global mar­ket is be­com­ing­morec­om­pet­i­tive, with ven­dors beyond Sam­sung and Ap­ple en­joy­ing grow­ing suc­cess.”

It comes down to the strong value propo­si­tion and in­creas­ing qual­ity of prod­ucts of­fered across all­pri­ce­points­by­compet­ingven­dorssuchasLen­ovo, Jones­said.

The rise of Xiaomi Corp, among other China-based smart­phone pro­duc­ers, is also an is­sue forLen­ovo.

Len­ovo must con­tin­u­ously roll out prod­ucts that ap­peal strongly to Chi­nese buy­ers in func­tion and price to main­tain its­mar­ket share in the coun­try.

As of Septem­ber, six of the top 10 global ven­dors were Chi­nese brands, ac­cord­ing to Canalys.

Xiaomi is run­ning neck-and­neck with Len­ovo for sec­ond place in China’s smart­phone mar­ket. But both com­pa­nies are eye­ing the top slot now oc­cu­pied by Sam­sung, which has been los­ing ground to lo­cal chal­lengers in re­cent months.

Xiaomi, based in Beijing, may hold an ini­tial pub­lic of­fer­ing as soon as next year, the South Chi­naMorn­ing Post re­ported. In­dus­try in­sid­ers spec­u­late Xiaomi’s val­u­a­tion could be as high as $50 bil­lion.

China, which can ac­com­mo­date both high- and low-end prod­ucts, will re­main the top smart­phone mar­ket for global hand­set­mak­ers for a long time.

Data from Canalys show the Chi­nese main­land ac­counted for more than one-third of the to­tal smart­phone ship­ments in the third quar­ter, with the US far be­hind at 13 per­cent. In­dia, the third-largest mar­ket, took 6 per­cent of global smart­phone ship­ments.

The global mar­ket is the next chal­lenge forChi­nese pro­duc­ers to con­quer.

“Len­ovo has gained brand aware­ness, car­rier re­la­tion­ships and cru­cial patent cover to en­able global ex­pan­sion,” said Jones. “As­sum­ing it can con­sol­i­date and grow from its cur­rent po­si­tion, Len­ovo, with Mo­torola, is well-placed to mount a real chal­lenge to Ap­ple as the world­wideNo 2 ven­dor in 2015.” Con­tact the writ­ers at gaoyuan@chi­nadaily.com.cn and liukun@chi­nadaily.com.cn

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