Lenovo will juggle two-brand strategy with Motorola

analysis Lenovo's CEO vows to protect and build up the Motorola brand. But how does a two-brand strategy fare against Apple and Samsung?

It appears the Motorola Moto G will survive the acquisition. Andrew Hoyle/CNET

To Lenovo CEO Yang Yuanqing, Motorola is a "treasure," and will be treated as such.

"It's our treasure," Yang said during a conference call with reporters Wednesday. "We plan to not only protect the Motorola brand, but make it stronger."

Following the announcement that Lenovo would pay Google $2.9 billion to buy the unit, Yang shed some light on where he plans to take the Motorola business -- at least for the foreseeable future, not too far. Yang said Lenovo would operate both brands where appropriate. In China and emerging markets such as India and Russia, Lenovo will continue to sell its own branded phones. Lenovo will operate the Motorola brand in North America and Latin America, where it has an established footprint.

Yang expressed his confidence that Lenovo and Motorola combined would give the company a legitimate shot at Apple and Samsung. He said he expected the company to eventually ship 100 million smartphone units a year, which would more than double the company's current output.

"Together, we will build momentum, return to profitable growth, and challenge the leaders in smartphones over the next few years," Yang said. "Definitely we have what we need to challenge the top two."

That may be just idle boasting. Because even if one plus one equals two, or even three, that won't put the combined company on par with either Apple or Samsung, which at that scale would each be around ten.

Lenovo controlled 4.7 percent of the global market for smartphones, largely due to its business in China, according to Strategy Analytics. Motorola doesn't even register in the top five, and is lumped into the "other" category. Their combined market share of 6 percent does make them the third-largest smartphone player in the world.

But in comparison, Samsung controls nearly a third of the market, while Apple has 17.6 percent of the market for smartphones.

The decision to operate the two-brand strategy means Lenovo will be juggling two different marketing budgets and sets of consumer expectations. Samsung, on the other hand, has made it an art form in how effectively it markets its products, while Apple has always had snappy, memorable campaigns. The common thread: Both companies can smartly allocate resources to a single, unified message.

In the US, a traditional base of strength, Motorola is the No. 3 player, but saw its share retreat in the fourth quarter, according to NPD. While Lenovo has high praise for Motorola and its legacy, the company was on the edge of losing relevance as the big two continue to swallow up more of the market.

Yang did concede that while both brands would coexist in the near term, the company would reassess whether the two need to be merged at one point. He said it was premature to talk about that.

At least in the near term, it doesn't appear as if Lenovo will shake things up too much at Motorola. Yang said he doesn't see any layoffs and will keep the company's headquarters in Chicago. He praised the engineering expertise at Motorola, and it appears that he wants to utilize that in improving Lenovo phones. Management will stick around for the transition and to "grow the business," although given that many left Google to join Motorola, it's unclear how long they will stay with Lenovo.

While Lenovo would get engineering expertise, Motorola would benefit from better manufacturing capabilities, a lower cost to build phones due to the larger combined scale, and a quicker turnaround on introducing new devices.

For fans of the Moto G and Moto X, Lenovo executives said they plan to support the products, with Chief Financial Officer Wong Waiming hinting at more Motorola products to come. To their credit, they appear to understand why those products have resonated with Android fans, even if they haven't sold remarkably well.

One question they did leave unanswered: What happens to the US manufacturing facility built to produce customized Moto X phones? Wong deflected the question, only noting that most of manufacturing was outsourced, like its line of Droid Ultra phones and the lower-end Moto G.

Lenovo has a lot to prove with the Motorola acquisition, but as evidenced by its successful takeover of IBM's PC business, it has done it before.

About the author

Roger Cheng is the executive editor in charge of breaking news for CNET News. Prior to this, he was on the telecommunications beat and wrote for Dow Jones Newswires and The Wall Street Journal for nearly a decade. He's a devoted Trojan alum and Los Angeles Lakers fan.

 

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