Lenovo Turns to Phones With Novel Technology for Growth

  • New phones bundle in extra technology to tempt consumers.
  • Company faces shrunken PC market and strong mobile competition

Lenovo Group Ltd. is adding experimental technologies to its smartphones in a bid to grow its business, trying to overcome declining personal computer shipments and a competitive mobile market.

The Beijing-based company said Thursday it will introduce a phone that uses a Google sensory technology named Tango, and announced two new Motorola handsets that can be augmented with additional equipment via 16 “magic dots” in their backs. At an event in San Francisco, the company also announced a partnership with networking vendor Juniper Networks to extend its data center unit.

“Over the past two years Lenovo has been transforming, making major acquisitions in mobile and infrastructure to expand beyond our core PC business,” said Yuanqing Yang, the company’s chairman and chief executive officer. “I was told we’d better launch something pretty exciting.”

Lenovo is looking to phones for growth to offset a struggling PC market. Lenovo was the largest single vendor of PC shipments in the first quarter of 2016, according to IDC, but shipments declined 8.5 percent on a year earlier. The company acquired the Motorola smartphone business for $2.8 billion in 2014 to help it hedge against this weakness, but turning those phones into major sales has proven to be a challenge.

Competitive Market

Lenovo faces an uphill battle trying to regain its share of the mobile phone market against renewed competition from local rivals like Huawei Technologies Co. Its smartphone sales in China fell 85 percent compared to a year earlier, Jenny Lai, an analyst at HSBC, wrote in a note to clients following Lenovo’s fourth-quarter results in May. Lenovo reported a full-year loss of $128 million compared with net income of $829 million a year earlier.

“Lenovo will step up its mobile investments in order to achieve targets,” she said. “Financial year 2017 will be a transitional year for Lenovo with flat shipments and continued operating losses in mobile business.”

To boost sales, Lenovo is turning to new technologies. The company will release a phone called the Phab2 Pro in September that uses technology from Alphabet Inc.-subsidiary Google called Tango. The system lets the phone host augmented reality applications, like software to help people navigate the world, play virtual domino and dinosaur games, easily measure spaces in households and add in three-dimensional models of furniture. With the Phab2 Pro, Lenovo will be the first company to field AR technology on smartphones without the need of a headset, separate device or attachment to a powerful computer. The cost of the Phab2 Pro will start at $499.

“Lenovo is creating a new kind of AR experience that is more portable, more practical, and will be even more popular,” Yang said.

New Handsets

The company also will release two new Motorola handsets, the MotoZ and MotoZ Force, that can be upgraded with additional equipment via what the company is calling Moto Mods. This lets people easily add battery power, speakers, projectors and other hardware capabilities to its phones by fastening the equipment with 16 “magic dots” -- or high-powered magnets -- to the phone’s back.

“Now your phone is not just your phone,” Yang said. With Moto Mods, the phone “can transform into whatever you wanted it to be or needed to be,” he said.

Lenovo is not alone in seeing value in adding more capabilities to its smartphones. Google plans to do the same via an in-development technology called Project Ara, that lets consumers swap different capabilities of their phones in and out according to their needs. And Lenovo believes that these new phones will drive further demand for its enterprise business as well.

“Of course all of this connectivity creates huge new demand for cloud infrastructure that is safe, reliable, easy to access, and of course easy to deploy and easy to expand,” Yang said.

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