Now that it has officially acquired Motorola Mobility, Lenovo is looking ahead to strengthening its global position in the smartphone market. Its $2.91 billion purchase of the Motorola mobile division from Google is aimed at helping the company take on current smartphone leaders Samsung and Apple.
Lenovo announced the completion of the acquisition -- which includes Motorola Mobility's Moto X, Moto G, Moto E and DROID series smartphones -- today. It plans to operate the company, which adds nearly 3,500 people to its global workforce, as a wholly-owned subsidiary with headquarters in Chicago.
While Lenovo chairman and CEO Yang Yuanqing said he was looking forward to the acquisition enabling his company to build a "strong number three" in the smartphone market. New reports from the analyst firms IDC and Strategy Analytics also show a growing threat from China's Xiaomi.
"With the complementary strengths of our two companies, we expect to sell more than 100 million mobile devices this year -- including smartphones and tablets -- by leveraging the Lenovo brand's leading market position in China, our shared momentum in emerging markets and Motorola's strong foothold in mature markets like the U.S," said Liu Jun, Lenovo executive vice president and president of Lenovo's Mobile Business Group.
However, in a blog post about the acquisition, Neil Mawston, executive director of Strategy Analytics, warned that, "Merging these two firms next year will not be as easy as many expect."
Mawston noted that "fierce competition" from Xioami and other smartphone competitors have eaten into Lenovo's global sales growth, halving the company's growth rate from 74 percent a year in the third quarter of 2013 to 30 percent a year in the third quarter of 2014.
During the same time period, Xiaomi saw its smartphone shipments grow by 246 percent, giving it a 5.6 percent global market share. On the day before Lenovo's acquisition of Motorola Mobility was completed, that would have been enough to put Xiaomi in the number three spot. However, third-quarter sales show Lenovo with 5 percent of the global market and Motorola Mobility with 3 percent, pushing the new twosome back into third place.
Merger Brings Challenges
Bolstered by its addition of Motorola Mobility, Lenovo will gain the advantages of deeper distribution channels across more countries, Mawston pointed out. The new duo also will benefit from a bigger marketing budget and more funds for research and development, he added.
However, the newly merged company will also face the challenges of slowing sales growth, Motorola's money-losing performance in recent years and the tendency of smartphone mergers to take several years go stabilize, Mawston noted.
Lenovo's executives have said they expect to return the Motorola business to profitability within four to six quarters. They are also pinning their hopes on new products such as the Moto 360, a smartwatch that retails for $249.99.