Lenovo’s struggling mobile business sets sight on high-end market

HONG KONG: After a bruising fall from its spot as the world's third-largest mobile phone maker following its acquisition of Motorola three years ago, China's Lenovo Group Ltd is counting on a push upmarket to stop the bleeding in its smartphone business.While the company, which vies with HP as the world's largest PC maker, returned to profit in the year to March, losses in its smartphone business worsened as marketing expenses for new products and key component costs increased.

The group's phone problems started after it acquired Motorola Mobility from Google for $2.9 billion in 2014 but struggled to integrate the assets. That, combined with fierce competition from lower-end manufacturers in its home base of China such as Xiaomi and Oppo, saw its global position fall to eighth in 2016.

A recently announced reorganization of its China business aimed at sharpening the PC brand's consumer focus comes amid an ongoing effort to tighten its mobile branding and shift the focus to pricier models under its Moto brand.

"Our strategy is to prioritize mature markets ... which need brands and innovative products, whereas emerging markets need efficiency," Chairman Yang Yuanqing said of Lenovo's mobile business at a press conference in Hong Kong on Thursday.

"So we will have two teams catering to the two kinds of markets with different product lines."

Lenovo faces its toughest battle in its home base of China, where it has slipped out of the top 10 smartphone vendors. Shipments domestically declined 80 percent year-on-year or 55 percent quarter-on-quarter in the first quarter of 2017, according to data from Canalys.

The company currently has three phone brands in China - the premium Moto brand, the cheaper Lenovo series, and an online-focused ZUK brand launched in 2015.

A Lenovo spokeswoman said its global mobile strategy would focus on the Motorola brand, although it would continue to support its other lines, such as ZUK.

Moto products, including a premium series of modular phones designed with detachable components that can be replaced or upgraded, helped propel Lenovo to be the second-biggest vendor in Brazil, after Samsung Electronics Co Ltd (005930.KS), Yang said.