Bottom line: Lenovo’s focus on PCs for its latest product launch is designed to divert attention from its struggling smartphones, which are likely to show more losses and weak performance in the company’s upcoming quarterly results.
Lenovo targets bargain hunters
It was just 2 years ago that Chinese tech titan Lenovo (HKEx: 992) was on top of the world, having just gained the title as the world’s biggest PC brand from Hewlett-Packard (NYSE: HPQ) and declaring that Apple (Nasdaq: AAPL) and Samsung (Seoul: 005930) were its next targets. But you don’t hear the company’s chatty chief Yang Yuanqing talking about Apple, Samsung or even smartphones that much these days, most likely because all of its efforts in that space have struggled to find an audience.
Instead, Yang was falling back on his company’s older PC business in the latest headlines, showing off a few new models from its Yoga line that can function as both laptop and tablet PCs. The only problem is that both of these types of computer are in rapid decline, as consumers increasingly flock to large-screen smartphones for simple functions like reading news and e-commerce shopping that they used to do on their PCs. Read Full Post…
Bottom line: Taiwan should quickly approve Tsinghua Unigroup’s plan to buy a quarter of Taiwan’s Powertech for $600 million if it finds no security issues, which could help to accelerate cross-Strait high-tech M&A deals.
Unigroup, Powertech in cross-Strait microchip tie-up
One of the biggest equity tie-ups to date between high-tech companies across the Taiwan Strait was announced late last week, when the acquisitive Tsinghua Unigroup said it planned to buy a quarter of Taiwanese chip company Powertech (Taipei: 6239) for around $600 million. The deal would provide Unigroup with valuable production assets in its drive to build a major new global chip maker, and would give Powertech cash and other resources as it fights for advantage in the highly competitive chip sector.
And yet despite the obvious rationale for such a deal, only a handful of similar tie-ups have occurred to date due to the risks of getting vetoed by Taiwan on national security grounds, since they involve sophisticated technology. Read Full Post…
Bottom line: VMWare’s new China joint venture is the latest such tie-up for a major western tech firm to ease Beijing’s national security concerns, and could prompt the US to implement tougher restrictions on technology transfers to China.
VMWare in China cloud joint venture
EMC (NYSE: EMC) and its acquirer Dell are jumping on a high-tech train that goes directly to Beijing, with word that EMC-controlled VMWare (NYSE: VMW) has become the latest IT firm to set up a joint venture with a Chinese partner. The trio of high-tech giants join a growing number of other leading US tech firms to form similar ventures, with Hewlett Packard (NYSE: HPQ), IBM (NYSE: IBM) and Cisco (Nasdaq: CSCO) all forming similar tie-ups over the past year.
The rush to form such alliances comes as China rolls out a new national security law that could otherwise limit the big multinationals’ ability to sell their products and services to the Chinese government and big state-owned enterprises. But at the same time, a new New York Times report is pointing out that many of the Chinese firms in these new tie-ups also have links to China’s defense establishment, potentially setting the stage for a showdown between Washington and Beijing over national security. Read Full Post…
Bottom line: The latest global acquisitions by Tsinghua Unigroup and Unisplendour show the company still aims to build a global IT services and hardware giant, which could culminate with a new bid for Micron in 2017.
Unigroup makes major boardroom acquisition
The ambitious Tsinghua Unigroup may have abandoned its controversial bid for leading US memory chip maker Micron (Nasdaq: MU) for now, but the Chinese high-tech wannabe certainly isn’t giving up on its global aspirations. That’s my interpretation of the company’s latest moves, which include its hiring of a Taiwanese executive with ties to Micron, as well as the recent purchase of a major stake in leading US hard drive giant Western Digital (Nasdaq: WDC) by a sister company.
Unigroup and sister company Unisplendour‘s names have appeared all over the map this past year, as they form a steady string of major equity tie-ups with the likes of leading global chip maker Intel (Nasdaq: INTC) and IT services and hardware giant Hewlett-Packard (NYSE: HPQ). But the companies’ ambitious plans to create an IT services and hardware megaplex similar to IBM’s (NYSE: IBM) hit a major roadblock over the summer, when Unigroup had to scrap its plans to buy Micron due to potential political opposition in Washington. (previous post) Read Full Post…
Bottom line: Cisco’s new joint venture will mostly resell its networking equipment into China, and is unlikely to ease Beijing’s worries that its products could be used by Washington for cyber spying.
Cisco calls on China with new JV
Networking equipment giant Cisco (NYSE: CSCO) has become the latest global tech firm to capitulate to China’s national security paranoia, announcing the formation of a new joint venture with a local partner. The tie-up with Inspur Group is just the latest in a recent string of new China-based partnerships involving big western tech firms. Those companies, whose ranks also include IBM (NYSE: IBM) and Hewlett-Packard (NYSE: HPQ), fear that without such well-connected local partners, they could get locked out of the lucrative IT services market under tough restrictions imposed by a new Chinese national security law.
Announcement of the new joint venture with Inspur marks a major shift for Cisco, which up until now has preferred to do its business in China by itself rather than with a local partner. Cisco’s earlier go-it-alone posture has already come with a high cost it in a country where Beijing prefers to see big foreign tech names transfer technology to local partners. Thus this latest partnership should perhaps help to ease some of that pressure, even though it could ultimately put some of Cisco’s intellectual property at risk. Read Full Post…
Bottom line: Huawei’s new push into IT services could do well due to the company’s strong background in telecoms products, and could see it form a major partnership in the area with a big global player.
IT services tie-up ahead for Huawei?
Networking equipment giant Huawei is continuing its diversification, with word that it’s planning a major push into the market for information technology (IT) services that could put it into direct competition with such giants as IBM (NYSE: IBM) and Hewlett-Packard (NYSE: HPQ). But perhaps more intriguing is the possibility that Huawei could form a major partnership with one of the big foreign names, amid a rise in such pairings due to restrictions on foreign firms under China’s new national security law.
Huawei began its life as a maker of networking equipment for big telecoms carriers, but more recently has tried to diversify as the global market for those products slows. It has pushed into networking equipment for enterprises, and more recently has found growing success with smartphones. But IT services has remained a relatively small portion of the business, expected to reach $2 billion in sales this year. That would be just a tiny portion of the 288 billion yuan, or about $45 billion, that Huawei posted in revenue last year. Read Full Post…
Bottom line: Dell’s massive new China commitment could foreshadow a major new tie-up that could see it sell a big stake of itself to a local partner, while Lenovo could be eyeing a major shift to OEM production for its floundering smartphone unit.
Dell bets big on China
Two of the world’s top PC makers are in the China headlines today, with homegrown leader Lenovo (HKEx: 992) and US giant Dell both making major strategic moves. But in a sign of the times, neither item is related to either companies’ core PC business, showing just how quickly personal computers are losing their relevance in the fast-changing gadget world.
Dell’s announcement contains the biggest headline figure, with the company announcing a new commitment to spend a whopping $125 billion in China over the next 5 years. But the Lenovo news is equally intriguing if it’s true, and hints the company could be preparing a major shift for its floundering move into smartphones. That shift would see Lenovo’s smartphone unit build up its business of taking manufacturing orders from third-party brands, a model known contract manufacturing or OEM production. Read Full Post…
Bottom line: The latest downbeat remarks from Unigroup’s chairman after a visit to the US indicate the company has given up on its bid to buy Micron, though it could potentially relaunch the effort after next year’s presidential elections.
Unigroup’s Micron bid looks dead
I wrote several weeks ago that a bid by China’s Unigroup to buy US memory chip giant Micron Technology (Nasdaq: MU) had become the victim of politics, and now it appears the deal is finally dead. Or at least it’s on life support, with little hope of resuscitation. That’s my interpretation, following the latest reports that say Unigroup’s chairman has given remarks that look quite pessimistic after returning to China from a last-ditch US visit to try to save the deal.
This deal looked quite interesting when it was first reported back in July, and would have been worth some $23 billion, marking the biggest-ever acquisition of a US company by a Chinese counterpart. But political sensitivities quickly surfaced due to Micron’s status as the biggest US maker of memory chips used in most electronic devices and also in the defense industry. Read Full Post…
Bottom line: Lenovo’s attempt to make Motorola the flagship for its smartphone business looks set to fizzle, in a major setback for the company’s drive into mobile devices.
Moto sales on downward slide
I’ve predicted gloom and doom before for PC giant Lenovo (HKEx: 992), China’s first truly global high-tech brand, and each time the company has proven me wrong. But Lenovo’s latest quarterly financial report really does look like cause for concern once more, showing results that can only be described as terrible. Anchoring the misery was a huge sales plunge for its recently acquired Motorola brand, which was meant to become a cornerstone for Lenovo’s emerging smartphone business.
In some ways this particular cycle looks like deja vu, since Lenovo followed a similar pattern when it burst onto the global stage a decade ago with its landmark purchase of IBM’s (NYSE: IBM) PC business. That acquisition also later created major headaches for Lenovo, and resulted in a massive restructuring that ultimately laid the groundwork for the company to become the world’s leading PC brand. Read Full Post…
China has developed a sudden appetite for global microchip makers, with the latest reports saying several Chinese suitors are pursuing a purchase of the telecoms chip business of US-based MarvellTechnology (Nasdaq: MRVL). This kind of consolidation is sorely needed in the global microchip sector, especially in the telecoms area, where many smaller companies are having trouble competing with global titans Qualcomm (Nasdaq: QCOM) and Taiwan-based MediaTek (Taipei: 2454).
An interesting twist to this story has seen Chinese state-backed firms emerge as some of the main consolidators in this trend, reflecting Beijing’s desire to build up a local chip-making sector. Despite years of trying and billions of dollars in investment, China has yet to find success in building a homegrown chip giant that can challenge big global names like Qualcomm, Intel (Nasdaq: INTC) and Taiwan’s TSMC (Taipei: 2330). Read Full Post…
Bottom line: Tsinghua Unigroup could end up scrapping its plans to bid for Micron due to fears of political resistance, while a new mobile OS that it’s backing is probably getting support from Beijing but is likely to fail.
China bid for Micron meets with early resistance
The recently acquisitive Tsinghua Unigroup is in a couple of headlines today, as the politically-connected company chases its dream of becoming China’s first IT products and services giant. The first headline has the company investing $100 million in a company developing a mobile operating system (OS) that could someday rival Google’s (Nasdaq: GOOG) Android and Apple’s (Nasdaq: AAPL) iOS. The second hints at the political resistance that Unigroup could meet as it reportedly gets set to make a $23 billion bid for leading US memory chip maker Micron (Nasdaq: MU), with reports that a powerful senator has concerns about the deal. Read Full Post…
