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The battle to gain market share in the fast growing smartphone segment just got more interesting as Lenovo announced its intention to acquire Motorola Mobility smartphone business from Google for $2.91 billion.
Globally, China-headquartered Lenovo has already emerged as the largest player in the personal computer market for calendar year 2013. Beating players like HP and Sony. However, the firm’s entry into the smartphone has been a tad late which also reflects in market share. According to Gartner’s Q3, 2013 data it is already number three in worldwide smartphone category though market share was just 5.1 per cent.
For India, though there is no direct impact, the announcement has significance for two reasons. One India is the fastest growing smartphone market and sensitive to price, and two Motorola was all set to launch its plan for the latest offering MotoG, the budget smartphone, on February 5. This also signaled the re-entry of the company into India.
Amar Babu, MD, Lenovo India said that nothing changes. "Several approvals are needed and the integration will take some time to be done, and so there won't be any changes in the planned launches," he said.
A quick look at the Indian mobile handset shows the scorching pace at which the smartphone segment is growing. And South-Korea headquartered Samsung has been ruling this segment comfortably.
The India smartphones market during July-September 2013 saw a rise in shipments by 10.9 per cent over and above the July-September 2012 number, taking the contribution of smartphones to 17.6 per cent of total mobile handset shipments during the period July-September 2013. Lenovo’s share in India’s smartphome segment is just about 1 per cent according to CMR.
“The benefits that Lenovo would gain out of this deal will extend to its existing markets including India, but will not be instantaneous. It’s going to take some time for Lenovo to leverage from the competencies gained and I see it as a medium-to-long range benefit for Lenovo. The company is already in the market and one of the ‘brands to watch’ at the moment. So, apart from marketing leverage, I don’t think this deal can help Lenovo in India or for that matter any market overnight,” said Faisal Kawoosa, lead analyst, CMR Telecoms Practice.
Analyst do feel that the development will have impact on Samsung, though not immediately. “Samsung is today at a similar juncture as Nokia was in 2007-08. There are several players in India, but the player that can erode Samsung’s market share will be someone who has technology innovation and deep pockets…at present Lenovo seems to be that player. Besides look anywhere its just Samsung…there will be user fatigue for same brand,” added an analyst on condition of anonymity. So Far Lenovo was playing in the higher segment of samrtphone segment, with Motorola it now has offering at the entry and mid-segment level, where smartphone growth is expected to be highest in India.
“Most hardware vendors with small margins are bleeding, and so I think, going forward there will be consolidation in the industry. Bigger vendors would be buying smaller ones and that's the way in the future,” said Vishal Tripathi, principal research analyst, Gartner.
In terms of branding, Babu said its too early to comment. "Motorola is a big brand in the west, but so was the Thinkpad, which was primarily a product for the mature markets. But today, Thinkpad has a strong hold in the emerging markets, including India." (Thinkpad was acquired from IBM in 2005).
The other area that will see an impact and which will be significant for Lenovo is the enterprise segment. Last week Lenovo acquired IBM’s server business for over $2 billion. In India Lenovo is a strong player in the enterprise segment, rather the initial market gain that the Chinese PC manufacturer saw in India was due to its push and presence in the enterprise segment. With Motorola the PC-tablet-smartphone play becomes stronger for Lenovo.
Babu believes that Motorola is a perfect fit for them. "We want to be a strong PC+ player, and the two large acquisitions announced in the last one week are absolutely in line with our strategy. I think this fits very well into our PC plus strategy. We have been building our business in the emerging markets, and that has been on track, but we did not have business in the mature markets, which this acquisition will get us. Motorola and Lenovo are both geographically very complementary for each other," he added.
Analyst point out that enterprises have emerged as big player for tablets. Recently ICICI bank took out a tender for 5,000 tablets. “Samsung has been trying to enter into the enterprise segment and this is one space in India where Lenovo has market share. Also Microsoft is not going to sit quite. They too are readying themselves for the battle to rule this segment,” said Alok Shende, principal analyst and co-founder of Ascentius Consulting.
Google strategy
Markets globally though are talking only about Lenovo, Google smartly is changing the landscape pf technology firms. With Samsung and now with Lenovo it seems Google is making sure that it has access to patents and innovation going ahead. It is also creating a consortium with like-minded players. That will divide the tech market into Apple, Microsoft and Sony on one hand and the Android backers.
“It seems like Google is not talking about just technology providers or value chain suppliers, but looking at technology partners who have a bigger say in the Android eco-system,” said Kawoosa.
“It seems Google is creating a security layer. Not only it’s trying to protect itself but creating an umbrella for those who are part of the Android world,” added Shende. Experts say this will be significant as some of its partners have some serious patent infringement cases coming up.
“Overall, 2014 is going to be an interesting year for Android OS based devices and may be in a year’s time we will be having discussions around altogether different perspectives," sums up Kawoosa.
