China's Lenovo aims for third in global smartphone market

February 13, 2014
CEO of Chinese computer giant Lenovo, Yang Yuanqing, pictured during a press conference in Hong Kong, on May 21, 2009

The chairman of Chinese computer giant Lenovo pledged on Thursday to make the company the world's third-biggest smartphone seller following an acquisition binge as the firm announced a 30 percent profit surge.

Lenovo, already the world's largest personal computer vendor, snapped up US telecom firm Motorola Mobility for $2.91 billion and IBM's low-end server business for $2.3 billion within days of each other last month.

"We will become the number three smartphone player in the world," Lenovo Chairman Yang Yuanqing told journalists on a conference call. "With the combined business of Motorola smartphone and Lenovo smartphone, we will have much larger scale."

That would put it in position to challenge US tech giant Apple, maker of the iPhone, which is currently the global number two behind South Korea's Samsung.

Lenovo is seeking to grow its business in the highly competitive smartphone market as consumers shift away from personal computers to mobile devices.

The Chinese firm was ranked fifth in the global smartphone market last year with a 4.5 percent share, trailing Samsung, Apple, compatriot Huawei and South Korea's LG, according to market research firm IDC.

But analysts say Motorola is deeply unprofitable with losses approaching $1 billion and some question whether Lenovo can turn the business around.

Advertising for Chinese technology giant Lenovo, seen in Hong Kong, on February 4, 2014

Lenovo's Hong Kong-listed shares have slumped around 14 percent since the Motorola deal was announced. At midday on Thursday, the stock was down 0.46 percent on the day at HK$8.64 ($1.11).

The company announced net profit in October-December—its fiscal third quarter—jumped 30 percent year-on-year to $265 million, helped by laptop sales, according to a statement. Revenue rose 15 percent on the year to $10.8 billion.

Lenovo plans to re-launch the Motorola smartphone brand in China as well as other emerging markets, Yang said. Analysts say its acquisition of the firm also gives the Chinese firm a larger foothold in the United States.

In China, Lenovo is already in second place with a 12.5 percent share of the smartphone market, behind only Samsung with 18.4 percent, as of September, according to consultancy Analysys International.

Yang defended the two rapid acquisitions, saying they presented rare opportunities for the Chinese company. Lenovo also bought IBM's PC in 2005.

"We have made a lot of acquisitions before. We know how to manage the integration and products, how to manage the challenge and the risk," he said.

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