China's Lenovo steps into ring against Samsung with Motorola deal

Thu Jan 30, 2014 3:58am EST
 
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By Paul Carsten and Matthew Miller

BEIJING (Reuters) - Lenovo Group, the Chinese technology company that earns about 80 percent of its revenue from personal computers, is betting it can also be a challenger to Samsung Electronics Co Ltd and Apple Inc in the smartphone market.

On Wednesday, Lenovo said it would buy Google Inc's Motorola Mobility handset unit for $2.91 billion in the fourth-largest U.S. acquisition by a Chinese or Hong Kong company ever.

"We are not only the number one PC company in the world but with this agreement we will become a much stronger number three smartphone company," said Wong Waiming, Lenovo's chief financial officer, on a conference call on Thursday.

Investors, however, took a dim view of the deal, which came less than a week after the company announced it was buying IBM Corp's low-end server unit for $2.3 billion. The stock fell 8.2 percent on concerns Lenovo might have overpaid for a loss-making business and would dilute the value of shares by issuing new ones to help pay for the purchases.

Together with the IBM agreement, Lenovo has agreed in the last week to fork over as many as 800 million shares, representing about 7.7 percent of its outstanding stock.

With its acquisition of Motorola, Lenovo is emerging as the most viable contender to global smartphone leaders Apple and Samsung - albeit still a distant third-place player.

The deal will allow Lenovo to step outside its China comfort zone and firmly into other regions, including the United States, where Chinese smartphone makers have struggled, and Latin America, where Motorola remains a strong brand.

Google has the opposite problem. China is one place its presence is barely felt since it left the market in 2010 because of network security concerns.   Continued...

 
Lenovo tablets and mobile phones are displayed during a news conference on the company's annual results in Hong Kong in this May 23, 2013 file photograph. REUTERS/Bobby Yip/Files