Lenovo Refocuses on Smartphones to Bolster Sales

Lenovo today reasserted its commitment to the smartphone market, saying it expects mobile Internet products to account for as much as 20 percent of its revenues within five years vs. the low single digit-range today. In fact, the company believes its mobile devices — Lenovo counts both smartphones and netbooks in the definition — will outsell its laptop and desktop PCs by 2016, it said during a media briefing. The product strategy makes sense — Gartner has predicted that smartphone sales will top those of computers by 2013, if not sooner — but Lenovo sure took a strange path to arrive at this point when it comes to smartphones.

Lenovo sold its Lenovo Mobile handset business in early 2008 for $100 million, reportedly to focus on notebooks, only to buy back the same entity for $200 million in November of 2009. Without a presence in the smartphone market during this time, it’s no wonder that Lenovo’s overall revenue percentage from what it calls a “mobile device” is a single digit. But even with a nearly two-year hiatus from the smartphone market, Lenovo isn’t out of the game just yet.

Lenovo is based in China, which, according to China’s Ministry of Industry and Information Technology, had 765.97 million mobile subscribers as of February. With a population of more than 1.3 billion, that works out to 42.7 percent without a handset in China. By way of comparison, the U.S. handset penetration rate hovers around 90 percent, while in many European nations, the rate is well over 100 percent as some consumers own multiple handsets. While basing a company in a particular country doesn’t guarantee sales there, upon the repurchase of the smartphone business, Lenovo said it “ranks No.3 in China’s mobile handset market and is the No.1 domestic brand.”

So now that Lenovo once again has a mobile division again — and a large, brand-aware potential market for its mobile products — what’s next? Lenovo could be pondering a pitch to Palm for the company’s webOS operating system and its many smartphone patents. While I still think HTC would be a more likely buyer of Palm, perhaps China is the best resting place for Palm’s platform. With a new start, proper marketing and a rebrand, webOS could get a new lease on life in China under Lenovo’s guidance. Barring that from happening, Lenovo will turn to Google Android for it phone strategy. At this year’s Consumer Electronics Show, Lenovo showed off its Lephone — powered by Android but with a custom user interface designed by Lenovo.

Related content on GigaOM Pro (subscription required):

Mobile Market Overview, Q1 2010

Image courtesy of Trusted Reviews.

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