Lenovo to Bring Motorola Smartphones Back to China

Lenovo Group Ltd. (992) will bring Motorola phones back to China in the first quarter, reintroducing the brand to the world’s largest market after an absence of more than two years. Shares rose the most in almost four months.
The Moto X will be sold in February, with the Moto X Pro and Moto G to follow later, Motorola spokesman William Moss said in phone interview today. Lenovo completed the $2.91 billion purchase of Motorola Mobility from Google Inc. (GOOG) in October.
Lenovo, the world’s largest maker of personal computers, is focused on an expansion in smartphones amid a global decline in PC demand. The Beijing-based company’s phone push has been challenged by cross-town rival Xiaomi Corp., which surpassed the company in China and worldwide smartphone market share in the third quarter.
“Motorola’s brand is well liked and respected in many markets, especially being a U.S. brand and long legacy in mobile” said Jessica Kwee, a Singapore-based analyst with researcher Canalys. “It is something that Lenovo can leverage.”
Shares of Lenovo rose 3.4 percent to close at HK$10.42 in Hong Kong, the biggest increase since Sept. 17. The stock rose 8.2 percent last year, its sixth straight annual gain.

Photographer: Tomohiro Ohsumi/Bloomberg

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“It’s been about two years since we actively launched products in China,” Moss said today. “Lenovo has been clear for some time that bringing Motorola back to China was going to be a priority. It’s something we’ve been working very hard on since the close of the acquisition.”

Xiaomi’s Rise

During the third quarter, Samsung Electronics Co. (005930) led global smartphone shipments with 23.8 percent market share, followed by Apple Inc. (AAPL) with 12 percent, International Data Corp. reported in October. Xiaomi was third with 5.3 percent while Lenovo was in fourth place with 5.2 percent, IDC said.
That was before Lenovo completed the Motorola purchase, which would have been enough to put Lenovo in third place globally, ahead of Xiaomi, IDC said in October.
Xiaomi’s advance has also relegated Lenovo to the lower tier of the smartphone price range and the Motorola purchase may aid a shift to more profitable devices, said Tom Kang, research director at Counterpoint Technology Market Research Ltd.

Slowing Growth

“Xiaomi is top in the $100-plus handsets while Lenovo is No. 1 in sub-$100 handsets,” Kang said. “Lenovo desperately needs a product in the mid-high tier and Motorola phones will definitely help.”
Lenovo maintained its 13 percent share of the China smartphone market during the third quarter, yet still slipped to third place from second a year earlier due to the rise of Xiaomi, Canalys said in November.
Xiaomi more than tripled its share in China to 16 percent in the three months ended September, from 5 percent a year earlier, Canalys said at the time. Samsung fell to second place from first as its market share dropped to 14 percent from 21 percent, the researcher said.
While smartphone shipments in China more than doubled in the past two years, growth will trail off to less than 10 percent in the next few years, IDC said in November.
Still, the market is too big for Motorola to ignore, Moss said.
“It’s the largest smartphone market in the world and one of the most exciting,” Moss said. “It’s a place we are excited to be going back to.”