Weak demand is hurting Lenovo
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 email@example.com and firstname.lastname@example.org