Silver lining in Lenovo sales amid dark clouds

A Lenovo Group Ltd stand at an expo in Nanjing, Jiangsu province. More than 60 percent of Lenovo's smartphones were sold outside China in the second quarter of this year.[Photo provided to China Daily]

Lenovo Group Ltd has found a silver lining in its ailing smartphone business, as sales of entry-level handsets in overseas markets remained vibrant during the past few quarters despite a slowdown in China.

The Beijing-based company was able to maintain its ranking as the fifth-largest vendor worldwide thanks to growing sales of affordable devices in India, the Middle East and other emerging markets.

Lenovo said strong growth in these markets helped it sell 16.2 million smartphones for the quarter that ended in June.

Although its 2.3 percent year-on-year growth in overseas shipments lags local rivals such as Huawei Technologies Co Ltd and Xiaomi Corp, the company is still a top smartphone exporter by volume. More than 60 percent of Lenovo's smartphones were sold outside China in the second quarter, according to the company.

Yang Yuanqing, its chairman and CEO, said the company is starting to harvest payoffs by shifting attention to overseas markets.

"The global market is less competitive compared to that of China and the number of competitors are also much lower," Yang said. He said some top Chinese players are finding it difficult to tap into overseas markets because of poor brand awareness, weak patents and insufficient marketing support.

"On the contrary, Lenovo enjoys a unique advantage in these areas because of its long-time overseas operations," Yang said.

Lenovo-branded handsets sold in the Middle East and Africa jumped 380 percent year-on-year during the April-June period. Sales volume growth in other emerging Asian markets also grew by more than 80 percent in the quarter, according to the company.

Overseas sales were one of the few highlights in Lenovo's quarterly report released last week.

Due to the global contraction of personal computer and smartphone demand, Lenovo's net profit plunged by a half in the past quarter, trigging worldwide job cuts of about 3,200 employees.

Antonio Wang, an analyst at International Data Corp, said regrouping the mobile unit was necessary after Lenovo started to feel the pressure from its $2.9 billion takeover of Motorola Mobility from Google Inc months ago.

"The (sales) situation in emerging markets was actually not that bad," Wang said.

According to an IDC report analyzing the second-quarter global smartphone market, Lenovo was able to "witness success" in many emerging markets such as India, using entry-level and mid-range models such as the A600 and A7000. The devices were sold via online retail channels.

"The Motorola brand within the Americas and Europe continues to thrive with the ultra-affordable second-generation Moto E and entry-level to mid-range Moto G devices," the report said, adding the launch of the third-generation Moto X and Moto G later this year will also bring growth momentum to the embattled mobile business.

Indian newspaper the Economic Times reported Lenovo is preparing to launch a 4,999-rupee ($77) smartphone supporting fourth-generation telecom technology in the country. The device will be the cheapest 4G handset in the Indian market, where demand for budget smartphones is skyrocketing.

Lenovo will, however, need more time to fully integrate the Motorola unit with the company. According to Lenovo officials, the company is still reeling from the wounds of the Motorola acquisition.

The company blamed the economic weakness in Brazil and other Latin American countries for sluggish Motorola shipments during the past three months. The region was believed to be the backbone for Motorola's global sales.