With Lenovo Group set to post its second quarter earnings on November 5, expectations are high that the world’s leading PC maker will show strong results.
Lenovo holds over 19% of the global market, with products like the ThinkPad, Yoga tablet, and Smartphones. The company is also the largest smartphone maker in the Chinese market (13 million phones sold), and fourth largest on a global scale, behind Samsung (25%), Apple (12%) and Huawei (7%). In the previous quarter, Lenovo stock had a strong performance, with an 18% increase compared to the previous year, with quarterly revenue of $10.4 billion. This year, the company offered the highest dividend payout in the company’s history, at $.46 cents, with an average distribution of 1-2/times per year.
With a focus on high-growth areas, Lenovo’s acquisitions will likely be the key to continued, steady growth, which will also help the company gain a foothold in untapped markets.
1) IBM’s x86 server business ($2.1Billion)
This acquisition raises Lenovo from number six in the world to number three, with approximately 14% market share, and will likely compliment its existing server business. This acquisition strengthens Lenovo’s long-term strategic partnership with IBM, which began in 2005 when Lenovo acquired IBM’s PC division. The official closing on this deal was October 1, 2014.
2) Google’s Motorola Mobility Smartphone Business ($2.91 Billion)
Lenovo continues to expand its smartphone business outside of its core market (China). The company stands to gain a stronger market presence in North America and Latin America with this acquisition. The target for finalizing this deal: End of 2014
Lenovo also has plans to roll out a new, China-based smartphone business in 2015 (under a different name), which will be geared towards making the company more competitive in China’s growing market, and drive profitability. This acquisition will be separate from the Motorola acquisition.
3) Blackberry (Rumored acquisition)
This isn’t the first time the Blackberry acquisition rumor has surfaced, but whether the acquisition moves forward or not, Lenovo’s current acquisitions have already put the company in a solid position to grow its mobile phone business.
A Different Approach to Celebrity Endorsements
If you’re an Ashton Kutcher fan, you’ll know that Lenovo tapped into his celebrity star power last year by hiring him as the company’s “Product Engineer”, to enhance Lenovo’s brand awareness, which has been lacking outside of China. With a blend of education and humor, Kutcher moderated a series of video focus groups to obtain consumer feedback, which also demonstrated how consumer-friendly Lenovo products are. Without a doubt, these videos go beyond the typical celebrity product endorsement.
Testing the Limits of Innovative Technology
Speaking of products, Lenovo recently unveiled some impressive devices at a London reveal event: The Yoga Tablet 2, Tablet 2 Pro, and the Yoga 3 Pro. The Yoga 3 Pro, a convertible notebook, is 13” in size, and 12.8mm thin, has a stable watchband hinge, and lies flat. The Yoga Tablet 2 has been dubbed as an entertainment device, and comes in 8” and 10” sizes. The Tablet 2 pro is the most impressive of the bunch, as the first tablet to embed a projector into the device, for use on a 50” display.
Lenovo has considerable potential for future growth. The technology continues to advance, and the company has been successful in capturing market share. And with the upcoming holiday shopping season just around the corner, product sales will likely drive profitability even higher.