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Lenovo Isn't Buying Motorola's Phones. It's Buying the Brand

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An employee holds the box of Motorola Mobility's Moto X smartphone at the Flextronics International Ltd. factory in Fort Worth, Texas. Photographer: Mike Fuentes/Bloomberg
An employee holds the box of Motorola Mobility's Moto X smartphone at the Flextronics International Ltd. factory in Fort Worth, Texas. Photographer: Mike Fuentes/Bloomberg

Lenovo Group doesn't need a phone company. It is a phone company. The Chinese consumer-electronics giant is currently the fourth-largest smartphone maker in the world, according to research firm IDC. It's bigger than LG Electronics, HTC, Sony and yes, even Motorola Mobility.

Lenovo isn't paying Google $2.91 billion for the Motorola handset unit to get access to a factory in Texas or phones with colorful cases. Heck, it's not even getting most of the patents. Lenovo is acquiring a brand that still has caché in developed markets, especially in the U.S. where it's based. Motorola is third in smartphone sales in the U.S., according to ComScore — a distant third to Apple and Samsung, but still third.

"The Motorola brand is strong in North America and Latin America, so for sure we will leverage this strength to build our business," Lenovo CEO Yang Yuanqing said on a conference call with reporters.

Liu Jun, who's leading Lenovo's newly created mobile business group, told Bloomberg Global Tech earlier this month that the company aims to bring its smartphones to developed countries this year . While the Motorola deal will take some time to clear regulatory approval in the U.S. and China, the acquisition could certainly move Lenovo closer to its goal.

"Buying Motorola Mobility is a much quicker way for Lenovo to access the premium smartphone market," Frank Gillett, an analyst at Forrester Research, wrote in an e-mail. "Motorola has not been shooting the lights out with designs or sales volumes in smartphones. So the value is simply in brand recognition."

Lenovo appears to be dipping into its playbook from when it bought the PC unit from International Business Machines. The ThinkPad brand helped the Chinese company become the world leader in computers. According to Google CEO Larry Page, it could work in mobile, too.

"Lenovo has the expertise and track record to scale Motorola into a major player within the Android ecosystem," Page wrote in a blog post. "They have a lot of experience in hardware, and they have global reach. In addition, Lenovo intends to keep Motorola's distinct brand identity — just as they did when they acquired ThinkPad from IBM in 2005."

For a sense of just how much Lenovo wants to sell phones in the U.S., here is what Liu told my colleague Cliff Edwards during the recent International Consumer Electronics Show in Las Vegas:

"The U.S. is the most important market in the smartphone space," Liu said. "From day one, when we targeted the smartphone business, we thought that to be a global player, we must win in the U.S."

And it's looking to use an American brand to do so.

To contact Bloomberg News staff for this story: Edmond Lococo in Beijing at elococo@bloomberg.net

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