CELLPHONES: Stubborn Lenovo Clings to Broken Motorola Name

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Bottom line: Lenovo’s decision to tweak the Motorola name is a desperate move to revive the brand, and only postpones an inevitable write-off the company will need to make for the failed acquisition.

Lenovo tweaks Motorola name

In a move that smells of desperation, struggling smartphone maker Lenovo (HEx: 992) has decided to tweak its Motorola brand name whose sales have tanked since being acquired by the Chinese company in 2014. The move will see Lenovo retire the formal Motorola name and simply refer to the brand by its shorter and trendier Moto moniker. More precisely, the brand will become known as Moto by Lenovo.

This particular move isn’t so significant from a financial perspective, since Lenovo isn’t ready yet to ditch the iconic but faded US brand it acquired for nearly $3 billion in 2014. But the reality is that Motorola lost its trend-setting image long ago, and Lenovo’s attempts to reclaim the brand’s luminary past have been a resounding failure.

I’ve previously called on Lenovo to take the painful step of writing off its Motorola purchase, even though that would require a painful admission of failure to revive the brand. (previous post) But instead, this latest move shows that Lenovo intends to cling to the Motorola name as it tries to overhaul its own smartphone division, in a strategy that could just prolong its recent rapid decline.

The latest reports are mostly coming from US media, since the only people who really care about this name tweak are old-timer fans of of a brand that was once synonymous with cutting-edge cellphones. The reports don’t contain much detail besides the name change to Moto by Lenovo, and add that the first models under the new brand will appear later this year. (English article)

The decision comes just a couple of weeks after media reported Lenovo was launching a major corporate overhaul as longtime chief Yang Yuanqing tries to turn around a smartphone division that will be critical to the company’s future. (previous post) I commented at the time that the overhaul looked like Yang’s last-ditch effort to save his own job, following the rapid downfall of its smartphone business over the last year.

Plunging Market Share

Lenovo saw its share of the China smartphone market plunge in 2015, with only 3.4 million units sold in its home market in the fourth quarter. That figure was barely enough to put Lenovo in the top 10, and compared with 10.2 million smartphones it sold in China a year earlier, according to market research firm IDC.

Lenovo sacked its smartphone chief last year, and this new branding decision on the Motorola name looks like one of the first major new decisions coming from the new head. It’s not too surprising that Lenovo won’t ditch the Motorola name just yet, since Yang Yuanqing doesn’t want to admit he made a $3 billion mistake with a purchase that was highly trumpeted at the time.

The reality is that it’s extremely hard to revive such a faded brand, and I really can’t think of too many similar revivals in the past. Even Microsoft (Nasdaq: MSFT) has dumped the Nokia brand name from the smartphone business it purchased from the former global leader, acknowledging the brand would be very difficult to revive after a similar rapid decline.

All that brings us back to the question of Motorola and Lenovo, and what to think about this latest branding decision. At the end of the day, Yang Yuanqing probably doesn’t have any other choice but to try to revive Motorola, since he’s unlikely to want to admit failure for one of the biggest purchases of his tenure leading the company. But ultimately the company’s board will have to take the necessary step of asking Yang to step aside, paving the way for a new leader who can write off Motorola and try some new approaches to reviving the smartphone business.

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