Lenovo and Alibaba look for new mobile directions
Chinese PC giant will turn a mobile profit at home and fund emerging market expansion, while Alibaba may buy stakes in OEMs
Published: 7 January, 2013
This will be the year when Chinese vendors become household names throughout the mobile world, not just in their home country. Huawei, ZTE, Lenovo and others are hoping to use the revenues generated from their rapidly expanding native smartphone market to support expansion elsewhere. While the first two are starting to make inroads into major western carriers, Lenovo's main focus is on emerging economies.
The PC maker has had several attempts at breaking into mobile segments, but has only really seen success in the past year, when entered the top three in the Chinese smartphone rankings. It says its mobile unit will achieve its first profit soon and this will fund a new push into emerging markets.
CEO Yang Yuanqing told Bloomberg that it will then steadily improve its mobile profits, both in dollar terms and in pre-tax income ratio, and aims to increase its pre-tax margin from 2.4% to over 3% in the next three years.
Much of the improvement, at a time when most handset makers are seeing squeezed margins, will come from the high growth rates in new smartphone economies. Over the past six months, Lenovo has launched devices in Russia, India, Indonesia, Vietnam and the Philippines.
"We have to invest in new areas but must manage the profit growth as well," Yang said. "Even though we will further invest in new areas, we are still committed to our shareholders." As well as basing its next moves on increased mobile profits, it will also use its leadership position in PCs to fun smartphone and tablet growth.
Over the weekend, it was reported that Lenovo would restructure into two business groups as it tussles with Hewlett-Packard for the number one spot in PCs. The new structure will take effect on April 1 and will divide the vendor into the Business Group, including mainstream PCs plus mobile and digital home products; and Think Business Group, focused on the ThinkPad range and targeting high end enterprise customers.
"We tried to push the Lenovo brand in mature markets but we realized that, as a brand, Lenovo only works in the mainstream and low end market. In the high end markets, Think is our best brand asset and the only brand which can compete against Apple," Yang said.
Meanwhile, another Chinese firm is looking for mobile growth. Ecommerce giant Alibaba courted controversy last year when it launched its own Linux-based mobile operating system, Aliyun, competing with Android for handset makers' attentions. It says it will emulate Google by investing in handset partners to drive growth of Aliyun, initially in China and later elsewhere.
According to reports, Alibaba plans to launch over a score of Aliyun smartphones in 2013 and will take a stake in one or two Chinese phone manufacturers. In September 2012, the company said it aimed to be the "Android of China" but ran into its first hurdle when Acer, reportedly under pressure from Google, cancelled its first Aliyun launch. According to Google, Aliyun is an incompatible Android fork though Alibaba maintains its OS is not Android-based.
This apparently made the etailer realize that it needed greater control over hardware to establish Aliyun as an Android rival. The firm also spun off its mobile OS team and said it would invest $200m in the venture. China is the world's largest smartphone market but some Google services are restricted there so many OEMs and operators replace vanilla Android with their own applications and user interfaces.