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Lenovo Refocuses on Smartphones to Bolster Sales

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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 (s 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 (s goog) 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.

8 Responses to “Lenovo Refocuses on Smartphones to Bolster Sales”

  1. HereAndNow

    Palm has done a great job with WebOS, but I still think Android may be the best platform for vendors to base their mobile devices on. Why?

    1. Android is open source, so vendors are free to create their own unique “user experience”, to differentiate their products (e.g. HTC Sense, Motorola Blur, SonyEricsson Rachael, Lenovo LePhone, …), while still maintaining app compatibility. I could even imagine the Palm WebOS UI running on Android.

    2. The development & support costs of the base Android platform are shared by the OHA members & Android community. A vendor with its own OS will have to deal with the time & cost of doing all of this work themselves.

    3. Android already has a huge & growing number of applications in the Android Market.

    4. Android supports multiple CPU architectures (x86, ARM, MIPS).

    5. Android is being targeted for other devices (smartbooks/netbooks/tablets/MIDs/TVs/…), so vendors will have the option to offer these types of products, as well.

    Android offloads the core platform work, allowing vendors to focus on great devices, apps & services (real revenue).