Lenovo to Make Mobile Phone Unit as New Profit Generator

Lenovo Group Limited (SEHK: 0992), the world's No. 4 personal computer (PC) maker, plans to make the recently repurchased mobile phone operation another profit generator as part of a business optimization.

The decision to buy back Lenovo Mobile Communications was made to smooth the series of adjustments in product lineup and profit model in the mobile Internet era, said Liu Chuanzhi, chairman for the Hong Kong-listed company, on November 30.

Lenovo had no other choice but to sell the mobile phone unit in 2003, according to Mr. Liu, explaining that Lenovo Mobile, underperforming when put up for sale, would possibly spiral into bankruptcy in two years if it were kept in hand.

On November 27, 2009, the PC giant announced its plan to spend USD 200 million buying back the mobile phone unit it sold off a year and half ago, a move market observers described as a signal that the Lenovo PC business would rely heavily on a mobile Internet strategy in the future.

Lenovo will take mobile Internet as a strategic division while expanding its global PC operation, striving to make mobile Internet another growth engine after the PC business, said Yang Yuanqing, chief executive officer for the company.

"Lenovo is likely to cut into the mobile Internet market by rolling out mobile Internet device (MID), similar to the new-generation products to be released by Apple Inc. (NASDAQ: AAPL)," predicted an analyst specializes in the Chinese mobile Internet industry, "the only product series that can lie between mobile phone and PC now is MID, and the company will find it difficult to snatch the MID market from its rivals provided that it walks away from the patch now."

However, executives for Lenovo declined to make a comment on such an analysis. The company will make its strategy for the mobile Internet segment known in two to six months, said Mr. Liu.

The sparkling iPhone and netbooks just serve to prelude the mobile Internet era, according to Mr. Yang, adding that a variety of terminals will make their presence as the 3G network become more fledged. Some market observers regarded the reacquisition of Lenovo Mobile as the PC maker's attempt to come up with the rising demand for netbooks in China in the wake of the 3G era.

It will be easier for the Lenovo mobile phone unit to go public as a wholly-owned subsidiary of Lenovo, pointed out an industry insider. Lenovo Mobile sets a goal to get listed on the renminbi-denominated A share market in 2011, a mission difficult to complete when it was under the control of companies registered out of Mainland China.

(USD 1 = CNY 6.83)

Source: www.nbd.com.cn (December 01, 2009)

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