Lenovo is the world's largest PC maker and the world's fourth-biggest smartphone maker, but its over-dependence on sales in its home territory in China is threatening its potential for growth. But, the company has said it is moving away from relying on China as it seeks to make the most of its acquisition of Motorola.
Lenovo's loss for the third quarter of 2015 was $714 million, the largest in the company's history, but below what analysts were expecting. The main reason for the big loss was restructuring costs related to the company's purchase of IBM's x86 server business and Motorola's smartphone business from Google. The company also reported increased sales and an improvement in its smartphone business.
Lenovo is best known as a PC maker, having acquired the ThinkPad business from IBM a decade ago, and is one of the few companies currently making a profit in this industry. As the PC market continues to decline, Lenovo is making a major push into the smartphone market and according to IDC's latest figures, the company is the world's fourth biggest smartphone maker, behind only Samsung, Apple and compatriot Huawei. But to continue its recent growth, the company is going to have to move away from its main market, according to its CEO.
Speaking to Bloomberg, following the publication of the company's latest results, chairman and CEO Yang Yuanqing said: “We significantly grew our smartphone business in the rest of the emerging markets, that’s our strategy. We know our China competition is too fierce, so we just shift our focus.”
According to figures from Canalys, Huawei is currently China's top smartphone maker, ahead of Xiaomi and Apple. While it may be the world's fourth biggest smartphone company in terms of units shipped, IHS estimates that Lenovo barely scrapes into the top 10 manufacturers in China, trailing behind companies like Meizu, Oppo and Vivo. The Chinese smartphone market has been seen as a huge opportunity for smartphone makers in recent years with everyone from Apple to hundreds of budget smartphone makers competing for a slice of the market.
Canalys describes the market as "cutthroat" giving credence to Yang's assertion that looking outside China will be key to continued growth. The company's stated goal is to make its smartphone unit profitable in the next six months and Yang has reaffirmed his commitment to this timeline, meaning the company will need to leverage the Motorola brand in more mature markets like western Europe and the U.S. while using its Lenovo devices in emerging market like the Middle East, Africa and Latin America.