Lenovo is already a big source of smartphones in China, and only a year ago the company stated that it aimed to displace Samsung as the top smartphone brand among mainland consumers. Market researcher IDC put Lenovo’s market share at 14.2 per cent versus Samsung's 15.31 stake at that point.
And just this past November, research firm Gartner ranked the company as the third-largest smartphone vender in the world. Buying up Motorola should allow the company to get even further ahead in terms of volume sales. But the more important story is in terms of brand.
"I think the rationale must be that they think that Motorola brand is stronger than Lenovo, which is actually already producing mobile phones," said Greg Armshaw, chief technology catalyst, Asia-Pacific, at McCann Worldgroup. "It is not like they are unfamiliar with the market."
Motorola's brand image in the west is already well established, which gives Lenovo a marketing pipeline it can feed with its own technology and products.
“Lenovo has been successful with the purchase of IBM assets with the IBM ThinkPad brand,” said Ben Ho, CMO of HTC and an ex-Asia Pacific marketing VP for Motorola. “And I believe it is with this confidence that Lenovo is adopting a similar acquisition strategy in the mobile business, to leapfrog. The Motorola brand not only carries credibility in the US market, it is also a very successful brand in China, first with the paging business and then followed by the mobile-phone business.”
Ho’s sentiment aligns with market consensus. Google will still hold the majority of Motorola's patents, and Lenovo has publicly stated that the Moto X and Moto G models will remain flagships, with little change in the product roadmap. So gaining an edge in production or underlying technology seems a secondary concern.
"Buying Motorola Mobility is a much quicker way for Lenovo to access the premium smartphone market with a leading Google Android (not forked-Android) offering than trying to do it with their existing design teams and brand reach," Frank Gillett, Forrester Research vice president and principal analyst, wrote in a blog post. "Using Motorola, just as Lenovo used the IBM ThinkPad brand, to gain quick credibility and access to desirable markets, and built critical mass, makes a lot of sense."
The purchase also plays into a global power shift. The 20th century ended with most major brands headquartered in the west. While many companies may have manufactured in Asia, the CEOs and CMOs all sat in US or European offices. This deal is part of a shift that sees more power centres crossing the pacific. The Motorola brand has much better reach in North and South America than it does in Asia, and that is key to the purchase.
Motorola has never made it onto Campaign’s Asia-Pacific's Top 1000 Brands list, even at the height of popularity of the company’s Razr phones. So while the deal will bolster Lenovo's foothold in the mobile industry with greater buying power, higher unit volumes and some technical injection, the core of the strategy really looks like an effort to extend brand reach. The promise is for better access to western markets, where the Motorola name carries more clout.
"As Chinese brands turn the tide of globalisation there is still the dilemma of whether a history of cheap manufacturing prevents a brand positioning itself in premium markets," Armshaw said. "In emerging markets no-brand Chinese phones are the cheapest phones you can buy. In many cases they are close imitations of branded devices like Apple. This is a difficult legacy to shake off, although brands like Xiaomi and are moving the needle. Maybe this American brand with its mass-personalised products is sufficient to shake off the legacy, without so much hard work building a brand over time."
But will the Motorola transitions to Lenovo control go as smoothly in the current climate as when the company took over IBM's laptop business? Given the troubles that Huawei Technologies has faced in the US over spying concerns, it remains to be seen. The same roadblocks should be less likely to confront a company that already grafted IBM’s computer business into its DNA. And after swallowing the laptop division years ago, Lenovo is now gearing up to take over the one-time partner's server business as well.
Still, there has been fuss over Japan's Suntory buying America’s Jim Beam brand in the US. But people may assign a different level of trust to their phone maker than to their distiller.
"There is no doubt that if anyone can produce a good device at an attractive price it is Lenovo," Armshaw said. "I am personally excited to see if they can bring Motorola back to the global stage."