14 DAY TRIAL // Lenovo, the giant Chinese electronics manufacturer mainly known for producing desktop PCs and laptops, announced it will quit the mobile phone industry and sell its mobile division for $100 million to Legend Holdings Ltd., one of its main shareholders.
2007 was a great financial year for Lenovo, with overall profits of $171 million, a huge increase when compared to 2006's profits that raised to $57.7. Despite this, the company's mobile business is far from being profitable, as it made losses of 134 million CNY (about $18.6 million) in the last year.
Lenovo entered the mobile business in 2001 and limited its handset distribution to China, but in the last years it started producing devices based on Windows Mobile with the intention of penetrating other markets, like Europe and North America. However, this did not happen, and the Lenovo handsets remained in China. Apparently, the Chinese market - where phones from Nokia and Motorola have a huge demand - is not suitable for Lenovo's mobile plans, otherwise the company's losses cannot be explained.
Lenovo is currently the world's fourth largest personal computer manufacturer, after HP (Hewlett-Packard), Dell and its Taiwan-based neighbor Acer. It reached this position after acquiring IBM's PC division, back in 2005. By selling its mobile branch, Lenovo will be able to concentrate on its main PC business, at the same time allowing the mobile business to overcome the loss-generating period and re-think its market strategies.
After completing the acquisition of Lenovo Mobile, Legend Holdings will continue to produce handsets under the Lenovo brand and will probably try to conquer a bigger portion of the Chinese market share. Also, we might see Lenovo phones expand to Europe and North America, as initially planned. This can only be a good thing, as a bigger competition generally means better products - better mobile phones, in our case.