Lenovo calls telecoms

Company to expand sales channels to revive struggling mobile division

When Lenovo Group completed its acquisition of Motorola Mobility three years ago, its CEO Yang Yuanqing declared war on the world’s top two smartphone makers, Apple and Samsung, but now it seems Yang has settled on a less ambitious goal of getting the company’s mobile division to turn a profit.

According to Lenovo’s latest financial statement, the company’s global smartphone shipments fell 26 percent year- on- year the quarter ending December 31, 2016, when its mobile division took a $ 112 million operating loss.

Lenovo has been squeezed out the of the top- five ranking of the largest smartphone makers by shipments, both in China and around the world, according to data tracked by International Data Corp ( IDC).

While Lenovo’s mobile phone division has struggled, under Yang’s leadership it has maintained its longstanding leadership in the personal computer segment.

In 2016, Lenovo’s share of the personal computer market crept up to 21.3 percent from 20.8 percent of global shipments, according to IDC.

Some analysts have suggested that Lenovo should sell its struggling mobile division to focus on its personal computer business, but Yang has other ideas.

“Mobile should be our core business as well,” he told Reuters in mid- February, after the company’s net profit fell 67 percent year- on- year in the last quarter of 2016.

Turning to the telecoms

After Lenovo reported its drop in profits, the company went on a hiring spree for its mobile division.

Over about a month, Lenovo brought in four new senior executives for the division. It hired Jiang Zhen, a former executive at Samsung Electronics Co, to head its mobile unit in China.

The other three executive it hired are former TCL China sales manager Zhu Han, former China Telecom terminal general manager Ma Daojie and former China Mobile executive Yu Gao.

Zhu was also a former China Telecom executive.

Lenovo has made a great effort to secure top talent in the industry for an elite management team. “Efforts and resources will be focused on the development of the Moto brand,” Yang said in a press release on March 6.

Of the four new executives, three had worked for China’s telecom carriers, sparking speculation that Lenovo aims to revive the brand by bolstering sales through the telecoms’ robust sales channels.

Although there has been a boom in online smartphone sales, many consumers continue to buy phones at China Mobile, China Telecom and China Unicom branches in the country.

China Mobile, the country’s largest carrier, aims to sell more than 400 million 4G smartphones in 2017, Sha Yuejia, vice- president of the company, said at a meeting in December 2016.

In 2016, China Mobile sold 519 million 4G handsets in China, according to data from the China Academy of Information and Communications Technology.

Xiang Ligang, CEO of the industry information portal cctime. com, said Lenovo’s phone sales will receive a big boost if the company gets a piece of the telecoms’ sales, according to a report in the Securities Daily on March 22.

Insufficient strategy

Lenovo’s focus on the telecoms can help it seize the opportunities that emerge with the next generation mobile network standard – 5G – but more diverse sales channels won’t be enough to revive Lenovo’s mobile business in the fiercely competitive Chinese smartphone market, analysts from the Guangzhou- based market consultancy iiMedia Research said in a report on March 17.

Even with the telecoms’ sales channels, Lenovo won’t be able to match the nationwide sales networks built by the competing brands OPPO and Vivo, the Securities Daily reported, citing Hong Shibin, a Guangzhou- based marketing expert.

Instead, Lenovo needs to put a lot more effort into making its smartphones more competitive and doing a better job positioning its products, analysts said.

Thanks to OPPO’s robust sales network and its ability to position its products, the brand ascended to the top of China’s smartphone market in the fourth quarter of 2016, when it took 18.1 percent of the market. The brand not only outperformed smartphone makers Huawei Technologies Co and Xiaomi Inc, but Samsung and Apple Inc as well, said IDC.

Lenovo did not make the top five, even though its own Motorola, one of the best- known smartphone brands in the world.

It has taken time for Lenovo to integrate Motorola, and there have been some side effects, Xiang told the Global Times in a previous interview.

Xiang blamed Motorola for Lenovo’s drop in phone sales in 2016.

After acquiring Motorola Mobility from Google in 2014, Lenovo has struggled with the challenges of integrating the company.

Lenovo COO Gianfranco Lanci expects things to change in 2017. In an interview with the news portal qq. com in January, he said that the integration of Motorola has been completed and the company will make a big attack in the mobile front this year.

Buoyed abroad

Lenovo has pinned its much of its hopes on the overseas market, where it has performed better than in its home market.

The Moto Z, a flagship smartphone model released in December 2016, is the second best- selling phone in Brazil, Lanci said.

Despite the supply constraints for key components, Lenovo’s mobile business has experienced strong growth, particularly in Europe, Africa, Latin America and the Middle East, the company said in its latest quarterly earnings report.

Like other Chinese smartphone makers, Lenovo has also set its sights on India. On Tuesday, Lenovo introduced its latest flagship smartphone, the Moto G5, in India.

In the fourth quarter of 2016, Lenovo became the No. 3 smartphone brand in India after Samsung and Xiaomi, according to IDC. Lenovo won its 9.9 percent market share through its strong offline presence and a steady release of new models.

Yang said Lenovo’s mobile phone business was on track to return profitability in the final quarter of 2017, buoyed by strong growth overseas.

In less than a month, Lenovo Group hired three new executives with experience working for China’s telecom carriers. Analysts said the personnel changes demonstrate Lenovo’s desire to revive its struggling mobile phone business, specifically by bolstering sales channels through the country’s powerful telecom carriers. Still, expanded sales channels won’t be enough for Lenovo to overtake its formidable competitors in the domestic smartphone market, analysts said. Perhaps aware of the challenge at home, Lenovo has achieved some success at increasing its market share overseas.