One big reason a Lenovo-Motorola acquisition makes sense
“This don’t make no ****** sense to me.”
“Oh what the ****?”
That’s a partial transcript of the conversation I just had with Chief News Editor Stephen Schenck, discussing the just-announced purchase of American smartphone maker Motorola by the Chinese technology firm Lenovo. The profanity, though bleeped out, is genuine; this is a scenario so outlandish that if you’d posed it to me as recently as two hours ago, I’d have made a silly bet including the phrase “I’ll eat my hat.” This means two things: first, I need to tone it down on the hyperbole. Second: I need to brush up on my business analysis skills.
The notion at first struck me as absurd. After all, Motorola is no longer the independent company it was for much of the smartphone era it helped create; it was scooped up by Google just two years ago for nearly $13 billion. That was a purchase many thought justified by a combination of Google’s interest in acquiring some needed patent protection for Android, and its desire to “verticalize” its smartphone business. Personally, I was stoked about this; the prospect of a Google that controlled everything about its halo smartphone line, from hardware to software, was very seductive to me – and the fruits that sprung from the loins of that union have proven quite popular indeed.
Popular, that is, to the tech press. Unfortunately for Google, the Moto X and Moto G haven’t been able to reverse Motorola’s ailing fortunes: the unit has continued to lose hundreds of millions of dollars since the acquisition. Still, with a parent company like Google, so unbelievably buried in money that it spends billions on niche segments like home automation, many of us only expected Motorola to keep losing money until it didn’t anymore. After all, that’s been Microsoft’s approach with Windows Phone, an effort that’s slowly but surely paying off.
But that’s not what Google is doing. Instead the company is selling the storied American brand to Lenovo -chiefly known as a maker of laptops and tablets- in a deal worth $2.91 billion. And while there are all sorts of negative takeaways here, ranging from speculation about Google’s competence in areas outside its comfort zone to eerie shadows of the Palm/HP debacle, I’ll leave those for other editorials. Right now, I want to talk about what makes sense about this acquisition. Specifically, from a consumer standpoint.
Lenovo and Moto: Peas in a pod, I’d say. pic.twitter.com/5V5q8ksjtC
— Tim Stevens (@Tim_Stevens) January 29, 2014
That’s a tweet from CNET’s Tim Stevens, and it perfectly encapsulates everything that’s right about this deal. Let’s put aside patent considerations and financial analysis, neither of which I’m equipped for (or frankly interested in). Let’s envision the world that Lenovo presumably intends to create.
The company has been actively pursuing an increased American presence for a while now, but it’s already well-known to U.S. buyers. Lenovo bought IBM’s PC business back in 2005, and since 2007 its logo has adorned millions of ThinkPads sold all around the world. And the company is doing fantastically: last spring its PC sales grew 10 percent while the rest of the industry’s shrunk by 8 percent. If you live in or visit a large American city, those numbers are backed up by a quick glance around your local coffee shop or shared office: here, ThinkPads have become synonymous with business computing.
Lenovo obviously wants to leverage its success in notebooks to fuel its growth in mobile, something evidenced by its attractive line of smartphones and tablets. But in mobile just as anywhere else, branding is crucial. And while Motorola’s name might have lost some luster over the years, in an America increasingly desperate for homegrown success stories, it’s tough to beat a local brand that’s been around since 1928. It’s the perfect match for a foreign company looking for a strong foothold in the U.S. market.
What makes this pairing even sweeter is Motorola’s historically tight connection with business users – the very market Lenovo has already captured. With the exception of the occasional BlackBerry, it was Motorola that provided all of the iDEN-based smartphones for the American wireless carrier Nextel, the operator with the highest-ever ratio of corporate customers. It was Motorola’s distinctive bat-wing logo that adorned every single one of those handsets, just as it did the two-way radios that preceded them, cementing a bond between the nation’s work force and its oldest wireless manufacturer whose effects still linger to this day.
At least, it seems to me, that’s what Lenovo hopes. Google offered a small insight into the future of the brand on its official blog, where it stated that Lenovo “intends to keep Motorola’s distinct brand identity” intact – a wise move. All other details have yet to be announced at this early stage, and the deal is of course still subject to approval from various governing bodies.
So one well-known American brand is about to join another, under the umbrella of a foreign company, in an effort to capture the very market from which those brands originated. It’s a very interesting situation from geopolitical and a business standpoint, but the most important question for those interested in the future of the Motorola brand is: will it work? And given Lenovo’s track record, I think it stands a very good chance of doing so.