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Lenovo’s on a Hot Streak

A rumored Lenovo-NEC smartphone joint venture would help Lenovo ramp up its phone business and expand existing supply chain relationships the companies have already established in the PC sector.

The rumor mill's latest spin is that Lenovo Group Ltd. and NEC Corp. are in “detailed discussions” to team up on mobile, according to Reuters. The widespread chatter is that the companies might be forging a deal to integrate smartphone manufacturing and retail activities.

It wouldn't be the first time the two companies have partnered. Chinese consumer electronics manufacturer Lenovo and Japanese electronics conglomerate NEC formed a PC joint venture in 2011.

The NEC Lenovo Japan Group was said to be Japan's biggest PC provider at the time, and the aim of the deal was to strengthen market positions (namely in Japan), enhance the companies' product portfolios, and expand their distribution channels. More specifically, the combination brought together Lenovo's manufacturing, procurement, and supply chain resources and NEC's marketing, sales, and distribution capabilities.

Similar benefits would likely be listed for any newly formed mobile unit, if talks turned into a signed contract.

Of course, though, Lenovo and NEC are mostly mum on if and how the talks are shaping up; several media reports cite unnamed sources who say talks are happening or that talks are happening with “multiple parties,” not just with one or another.

The timing of talks, however, has to be more than sheer coincidence.

A few weeks ago, Lenovo laid out its product portfolio strategy, with top management saying that corporate development investments were going to be focused on fast-growing tablet, smartphone, and enterprise hardware areas.

Some news outlets said that focus could translate to 60 million Lenovo smartphones being sold in fiscal 2013, up from the 23.5 million units it shipped the previous year.

Job cuts
NEC is reportedly cutting 400 jobs from its mobile phone handset unit, about 44 percent of the 900 workers in that group, and relocating them to other NEC companies, according to a MarketWatch story, citing Nikkei reports. An unnamed NEC official denies that the labor cuts are linked to the Lenovo joint venture talks, but instead are a way for the money-losing division to reduce fixed costs and improve the unit's business performance, the reports note.

Regardless of where the rumors lead, the writing is on the wall. Lenovo has been shoring up its base PC business in its home country and beyond. It's a quick rising star, stealing market share from well-established PC OEMs.

The company has developed a well-oiled manufacturing and supply chain machine, and it has the financial strength to replicate and refine its PC model in other consumer electronics sectors. Whether it's with NEC or someone else, Lenovo will strike a deal somewhere; history has already proven that with its IBM ThinkPad acquisition.

But, the smartphone market isn't an easy place to win traction. Market leaders have already won over users in many pockets of the world. And, companies that got in early but failed to elbow their way to a higher ranking on the sales charts may be looking for a way to bail ship or recoup losses.

Soon, we will probably hear more talks like the ones Lenovo and NEC are said to be having. The inflection point is happening and the market shakeout will eventually follow suit.

It's too early for the electronics supply chain to react just yet. Nothing's set in stone yet. Then again, it's never to soon to keep eyes wide open.

25 comments on “Lenovo’s on a Hot Streak

  1. prabhakar_deosthali
    June 20, 2013

    It will be interesting to watch this development. I am sure , the way Lenovo came out a winner in Laptop segment after acquiring IBM Thinkpad business, this time also it will create a niche for its smartphones market especially in Asian countries

  2. Mr. Roques
    June 20, 2013

    Lenovo is doing a great job. I've been an IBM/Lenovo owner for years and haven't had any issues with any of them.

    In the tablet / phone market, they have some presence but they need to step it up. How? We'll have to wait and see because competition is harsh. Lean supply chains that can react quickly to changing technologies.

  3. Tom Murphy
    June 20, 2013

    If the reports are accurate — and frankly, I wonder if they are — a Lenovo-NEC combination could produce a very competitive smartphone.  Watch out, Samsung.

  4. _hm
    June 20, 2013

    NEC and Lenovo should make detail study and also evaluate recent failure history from similar other organizations. If there is no sound long standing logic and commitment, both of them may be looser.

    Apart from that, innovative technology will be key to success. Mobile phone is a consumer product.

  5. Lavender
    June 20, 2013

    Based on the huge China market, Lenovo sees growth in PC and smartphone segment, but PC is continuing its decline, and with high-end market moving toward saturation, Samsung and Apple declare intention to mid and low-end smartphone market, Lenovo will not be very smooth in PC and smartphone industry. 

  6. ahdand
    June 21, 2013

    I think Lenovo is doing a good catching up job. I feel HP, Dell and Nokia should be mindful about this serious catching up thing of Lenovo.  

  7. SunitaT
    June 22, 2013

    Samsung and Apple declare intention to mid and low-end smartphone market, Lenovo will not be very smooth in PC and smartphone industry.

    @Lily, I totally agree with you. Let's not forget Nokia which is also releasing many low-end smartphones to the market. Then there are many small companies like Micromax which are providing high end features in their smartphones at very less price.

  8. itguyphil
    June 22, 2013

    Lenovo made the right decision to niche-down. Focus on business users. Much like Microsoft did with their software, corner the market then expand into other areas if you want. Remember, businesses are full of regular people. If they see a product at work everyday that's reliable and gets the job done, they're more likely to purchase it as their personal machine too.

  9. Houngbo_Hospice
    June 22, 2013

    @tirlapur,

    It is certain that competition will be very fierce in the low-cost devices market. If Lenovo will now be focussing on “fast-growing tablet, smartphone, and enterprise hardware areas”, I wonder if it can compete with already well-established companies in these areas.

  10. Houngbo_Hospice
    June 22, 2013

    @pocharles,

    “Lenovo made the right decision to niche-down. “

    We will see how all these new strategie will fold out. As I said earlier, I don't think Lenovo will have an easy time selling its products to even “regular” people as the market is already “saturated” with competitors' products.

  11. SunitaT
    June 22, 2013

    I've been an IBM/Lenovo owner for years and haven't had any issues with any of them.

    @Mr.Roques, I totally agree with you. I am using IBM/Lenovo laptop from last 5 years and till now I havent faced any issue with my laptop. I think Lenovo provides great hardware features which are reliable and lasts long.

  12. Wale Bakare
    June 22, 2013

    @HH, i cant diagree with you on that. Mobile phone markets becoming too jam packed. No other reason could be responsible than fear over PC. In addition, it's also speculated Huawei is planning for acquisition of Nokia. Would it possible? I hope to see in next 2 years how things would to take shape in mobile phone business.

  13. hash.era
    June 24, 2013

    @wale: I think its good to have a packed mobile market since then the opportunities will be higher for the consumers. More the competition more the benefits.

  14. elctrnx_lyf
    June 24, 2013

    More mobile phones are definitely good for the customers but the companies have to struggle to really make an impact in the market. But probably here is the time that a smart phone is really becoming a normal jus like the way a basic phone five years ago. But I hope Lenovo can pull it off again with right products.

  15. Tom Murphy
    June 24, 2013

    There were several reasons why Nokia lost the lead in the phone market years ago, but the biggest one I recall was that it decided to grow the market by providing low-cost phones to emerging markets.  The supply chain issues in those areas tied with retailing issues and connectivity issues got in the way.

    Today, it is a slightly different market, but I think all the players recognize that selling phones in central Africa or the poorer countries of Southeast Asia is a much harder business than selling high-end phones to the First World.   Does Apple really want to compete with a Chinese company like Lenovo for that low-end market?  I sincerely doubt it — unless it is looking for a market to dump its outdated models.

  16. Himanshugupta
    June 25, 2013

    Tom, i do not think that Apple needs to enter low cost smartphone to dump its outdated models. Low cost also means low margin so a company like Apple has to be a real trouble to start looking in this segment. I would suggest that Apple needs to expand its product base. Its golden time to Apple to expand its product base as the middle class in BRIC nations has the money to spend on luxury products.

  17. Himanshugupta
    June 25, 2013

    @tirlapur, i donot think that hardware configurations matter a lot post a certain specification. Its now more about the software experience as we have seen with the Windows vs iOS vs Andriod. I think the next will be integration of the various electronic platforms and connectivity.

  18. Tom Murphy
    June 25, 2013

    Himanshu:  That may be Apple's intention but I think it will have a very hard time competing on price, and I don't see any new innovation that will sustain the iPhone franchise.  Siri was the last major innovation and she is now about 18 months old (and still the target of many jokes).    The game is afoot and all companies are in the hunt — Apple, too.

  19. Mr. Roques
    June 25, 2013

    Although my girlfriend, who's a long-time Apple user, keeps telling me how ugly it is. My answer is: “most engineers use them! leave me alone” but I'm slowly losing the battle. 

  20. itguyphil
    June 25, 2013

    Agreed on that point. But they can survive for a long time with just the business segment. Anything else is the cherry on top.

  21. ahdand
    June 29, 2013

    @pocharles: Yes but Lenovo has a long way to go if they are trying to establish a market in the cooperate sector.       

  22. itguyphil
    June 29, 2013

    I have seen a lot of organizations that do. Dell is their biggest competitor and they are losing a lot of market share in the consumer market.

  23. hash.era
    June 30, 2013

    @electrnx: Yes Lenovo has a good strategy it seems. Anyway good to see them fighting hard for their places in the market.               

  24. ahdand
    June 30, 2013

    @pcharles: I think Dell still leads the way but they have to be careful with their strategies. 

  25. itguyphil
    June 30, 2013

    Yes they do. Especially with their apparent direction to go private.

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