Lenovo Group on Friday announced that it is acquiring the entire interest of Lenovo Mobile Communication Technology from a group of investors led by Hony Capital, the private equity arm of Legend Holdings. Consideration of the acquisition is approximately US$200 million in cash and Lenovo shares. The announcement signals increasing interest of Lenovo in the booming mobile Internet market, particularly in China.
“As Lenovo’s global PC business continues to make steady progress, we view mobile Internet as a key growth opportunity moving forward globally. Lenovo has prepared itself in this area. We have developed first class products with excellent hardware and operating systems integration. We will launch these innovative new products in China soon,” said Yang Yuanqing, chief executive officer of Lenovo Group.
Convergence between the personal computing and mobile handset industry has been a key technology trend over the past several years worldwide. The two technologies today provide very different user experiences that are evolving and combining to create new generations of devices, applications and Internet services. In addition, China is entering a high growth phase. Driven by the government and telecom service carriers, the demand for mobile Internet devices has created a huge market.
Industry analysts project the China mobile Internet market will grow to exceed $16 billion by 2014, fueled by the rapid evolution of 3G mobile broadband and accompanying multimedia Internet services, Lenovo said.
Lenovo has been following the business opportunity in the fast growing mobile Internet market. With this acquisition, Lenovo aims to maximize the combined synergies of the two companies in product innovation, lean manufacturing, strong distribution channels and retail presence to lead the market for new mobile handheld devices in China.
Lenovo Mobile has an experienced and successful leadership team in the China mobile industry, healthy financial performance, an extensive channel network, and good relationships with domestic telecom carriers in China.
“With Lenovo’s brand, strong channel and excellent operation platform, we’re confident in our ability to execute our mobile Internet strategy and make it our next growth engine after the China business,” added Mr. Yuanqing.
Meanwhile, analysts were quite surprised by the move and the price of Lenovo Mobile.
“It makes you feel that they are always a bit late. Also, the price tag is a bit high. […] Lenovo’s decisive push into the new product segment of mobile internet devices – also known as smartbooks – showed the company was getting more aggressive,” said Charles Guo at JPMorgan, reports Financial Times.