Lenovo’s $3bn acquisition of Motorola has surprised many in the technology world, unused — presumably — to the idea of Google making any kind of a miscalculation. Yet even Google’s motives should not appear startling, once you look beyond the relentless rhetoric that surrounded the company efforts to rebuild a once proud mobile brand.
Google paid $12.5bn to acquire Motorola Mobility two years ago. In doing so, it made two bets. The first — neutralizing Moto’s patent threats — paid off. The second — building its own smartphone empire — did not, even if the Moto X and Moto G have been well received.
Of more interest, particularly from a branding perspective, will be how Lenovo handles its new purchase. There is, of course, a precedent here. In 2004, the Chinese tech giant bought IBM’s PC division, a deal that truly was surprising at the time. Lenovo has since parlayed that acquisition into improved sales — it is the world’s number one PC maker — but the company is still something of an unknown quantity in many Western markets, noticeably absent from Interbrand’s latest top 100 global brands list.
Lenovo is hoping the Moto deal provides a similar filip, as long-term China tech commentator (and Allison+Partners executive) David Wolf pointed out to me. “Lenovo clearly sees an opportunity with Motorola similar to what it found with IBM’s PC division: an opportunity to absorb an undervalued asset to the long-term benefit of its own brand and market reach.”
The storied Motorola brand, as Wolf notes, retains considerable global equity, even if it has fallen on hard times. “The lingering question is what Lenovo will do with the Motorola brand,” he says, with some justification. Lenovo’s decision to jettison the IBM brand earlier than it had to did not play out well, “screwing the company out of four years’ use of a $53bn asset” and severing its one visible link to IBM’s outstanding reputation in Western markets.
The hope is that Lenovo is not quite as shortsighted in its treatment of Motorola, which has proved — via the Moto X and Moto G — that it can compete with other Android players. In Lenovo, furthermore, Motorola Mobility may have finally have found the parent company that it needs — one with deep pockets and a genuine ambition to succeed in the mobile market.
Keenly aware of the need to diversify beyond PCs, Lenovo is already the world’s fourth-ranked smartphone brand, thanks to sales in China and other Asian markets. Moto gives it a credible international brand, at a time when Chinese companies continue to find it difficult to build trust in Western markets. As JWT’s Tom Doctoroff recently noted, Chinese brands are hardly taking over the world — instead they are largely capitalising on their perception of value in emerging economies.
That may not be completely true of Lenovo, which — led by global CMO David Roman — has invested considerable sums of money in building a distinctive international brand. The Moto acquisition suggests that this marketing strategy is not enough, that Lenovo still requires the benefit of an established global brand name, assuming it does not kill it off too soon.
“I maintain that they were ill-advised to abandon the IBM brand on PCs when they did” says Wolf. “They would be unwise to make the same mistake twice.”
