- October 30, 2014, 8:26 P.M. ET
Lenovo Contests IDC Ranking; How Relevant is Motorola?
By Shuli Ren
Lenovo (0992.HK/LNVGF) yesterday closed the $2.9 billion merger deal with
Motorola Mobility, which
Google (GOOGL) divested.
After the deal close, my colleague
Tiernan Ray of Barron’s
Tech Trader Daily blog got the following message from Lenovo:
Yesterday’s IDC smartphone data was a day too early. As of this morning,Motorola and Lenovo are a clear #3 with 25.6 million devices, 8.7% market share and a global footprint.”
Background:
Xiaomi shipped 17.3 million w 5.3% share, Lenovo shipped 16.9 million, Motorola shipped 8.7 million devices, so combined Lenovo+Moto shipped 25.6 million, w 8.7% share.
In the third-quarter, for the first time, Chinese smartphone manufacturer Xiaomi joined the top 3, after
Samsung Electronics (005930.KS/SSNLF) and
Apple (AAPL). See Tiernan’s blog “
Samsung Falls, Apple Rises, Xiaomi Shoots Out of Nowhere in Q3 Smartphone Rankings“.
IDC’s third-quarter ranking is history; the more relevant is the future. Can Motorola Mobility help Lenovo in its quest for smartphone users worldwide?
Strategy Analytics is
skeptical:
The “big three”
DISDVANTAGES of the merger include:
1.
Lenovo is slowing down. Lenovo’s rapid smartphone growth of recent years is now coming to an end, due to fierce competition from Xiaomi and others. Based on our data, Lenovo’s global smartphone shpiments annual growth rate has more than halved from +74% YoY in Q3 2013 to +30% YoY in Q3 2014;
2.
Motorola is losing money. Motorola continues to make hefty financial
losses, due to a relatively large cost-base. Based on Strategy Analytics data, Motorola has NOT made a profit for 4 years;
3.
Smartphone mergers usually take several years to integrate. For example, TCL-Alcatel, a Chinese and French merger, took around 5 years to stabilize and sustain growth.
Clearly, Lenovo and Motorola have strong
tailwinds — such as 8% global smartphone marketshare and two well-known brands. But Lenovo and Motorola also face major headwinds. Lenovo’s golden era of easy smartphone growth is coming to an end, while Motorola continues to lose money.
Mergingthese two firms next year will NOT be as easy as many expect.
But
Barclays‘s
Kirk Yang and
Ric Cheng are more encouraging, saying Motorola could break even in only 2-4 quarters:
We believe it should be easy for MOT to at least double its smartphone shipments this year, helped by strong MOTO G and MOTO E demand (mainstream models), while MOTO X targets the high end. As MOT’s ASP is around US$200, it complements Lenovo’s ASP of around US$70 to broaden the product portfolio and possibly embark on a dual-brand strategy in selected markets. MOT will bring Lenovo more IP than its China competitors and give Lenovo a better chance to succeed outside of China, especially in mature markets, in our view. Lenovo reiterated its expectation that it would take 4-6 quarters after the deal closes for the combined business to break even, but we believe it should only take 2-4 quarters since MOT’s smartphone business is already gaining share in 1H14 (prior to the closing) and we expect strong synergies can be achieved between Motorola and Lenovo.
Ok,so the top-5 smartphone makers for Q4 2014 will be:
(1)Samsung
(2)Apple
(3)Lenovo
(4)Xiaomi
(5)Huawei(replacing LG)