CELLPHONES: Lenovo Bets Big On Motorola China Homecoming

Bottom line: Motorola’s China homecoming looks well-designed conceptually, but will have trouble due to stiff competition and is unlikely to become a major player in the next 2-3 years.

Moto returns to China

I’ve written quite a bit already about Lenovo’s (HKEx: 992) big plans for its recently acquired Motorola brand, which has just made its formal return to China with the local launch of the Moto X smartphone. But what’s surprised me a bit is the magnitude of the campaign that Lenovo has given to this homecoming, which hints at the big hopes it has for the brand whose name whose cutting-edge phones were once the ultimate in “cool” and “trendy”.

It’s been a number of years now since that image was relevant, and many younger Chinese might not even remember the Motorola name at all. But Lenovo is clearly hoping that this homecoming and all the accompanying fanfare will reawaken some of those former impressions among China’s older consumers, in a certain form of “retro-cool” to counter the more recent rise of names like Xiaomi and Coolpad (HKEx: 2369).

All that said, I should also disclose that one of my own reasons for writing so much about Lenovo and Motorola is personal, as I’m one of the older people who can remember the time when Motorola’s phones were quite reputable. I even owned one that was quite reliable and well designed, and I used it for many years. And like everyone else, I was quite disappointed when the company began its downward spiral about 6 or 7 years ago that ended with its purchase by Google (Nasdaq: GOOG), which later sold it to Lenovo.

While Google was interested in Motorola mostly for its patents, Lenovo is far more interested in the brand, which was featured prominently in the announcement of Motorola’s return to China. (company announcement; English article; Chinese article) Lenovo began with the launch of the brand’s Moto X, which sells for the notably upscale price of 3,299 ($530), far more than most of the cheap smartphone models now flooding the China market carrying Lenovo’s own name.

The Moto X release will be followed by the more down-market Moto G, costing just 1,299 yuan and set for release on February 10. Lenovo also plans to release its Moto X Pro phone, Moto 360 smartwatch and Moto Hint wireless ear bud headphones at future unspecified dates. It has signed on with most of China’s top online and traditional retailers, taking advantage of its strong distribution channels in its home market.

Lenovo is borrowing heavily from smartphone sensation Xiaomi with its heavy use of the Internet in the Motorola homecoming campaign. Before the launch Lenovo held an online vote for Chinese consumers to pick what colors and materials they wanted for the Moto X, and the list of retailers who will sell the phone is heavy with e-commerce names. Lenovo will also open an online design studio for the brand, where buyers can customize their models with colors or materials, wallpaper and memory.

The campaign looks relatively well conceived, and takes care to downplay the Lenovo name that is relatively well respected for PCs but is considered a cheap, low-quality choice for smartphones. Its offer of a wide range of models and products also looks like a good plan, catering to the wide array of image-conscious Chinese who might want to revisit the brand or try it out for the first time.

The 2 big challenges for Lenovo will be the intense competition in the market, and also the brand’s lack of familiarity among many younger Chinese. The company will bring the advantages of strong distribution and service channels for the phones. At the end of the day, those channels should help Lenovo to flood the market with Moto phones the way it has with its own brand. But finding a new following for the Moto name in the crowded market will be tough, and I doubt the brand will be able to enter the top 5 over the next 2-3 years.

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