Lenovo-Moto deal's impact on Apple? Zip
Apple won’t lose any sleep over the Lenovo acquisition of Google’s Motorola handset business, analysts say, citing a slew of reasons.
Late Wednesday, Lenovo announced that it would buy the Motorola phone business from Google in a deal worth nearly $3 billion that also included 2,000 patents and the Motorola brand and trademark portfolio.
Google acquired Motorola Mobility in 2011 for $12.5 billion, but did not lose the entire $8.5 billion difference, having gotten the $3 billion in cash that Motorola had at the time of purchase. Google also sold off Motorola’s set-top box business to Arris in late 2012 for $2.35 billion.
While analysts digested the unexpected news yesterday and today, trying to forecast the changes in the global smartphone and tablet markets that might take place with a larger Lenovo in the running, few thought that the deal would affect Apple, or its iPhone or iPad businesses.
“The overall dynamic has changed, but this shouldn’t keep anyone awake at Apple,” said Tuong Nguyen of Gartner, in an interview Thursday. “For Lenovo, this has a lot to do with them expanding beyond the Chinese market and trying to get a footprint in other geographies. But Apple is a high-end play. I don’t know that Lenovo has any kind of brand share at that [price] tier, which is where it would have to be to threaten Apple.”
Last quarter, Lenovo was the world’s fourth-largest smartphone vendor, according to IDC estimates, and was fifth worldwide for the year. The bulk of its smartphone sales are in China.
Apple was the No. 2 smartphone maker for 2013, and held the same spot for the fourth quarter; in both cases, Samsung was the clear leader, accounting for nearly a third of all devices shipped during the year.
“Motorola might give Lenovo some awareness and credibility in North America,” said Nguyen. “But Apple and Samsung dominate there, by a large, large margin.”
Ben Bajarin, of Creative Strategies, also thought the Lenovo-Motorola deal, assuming it passes regulatory muster, wouldn’t change the landscape for Apple.
“No real issue for Apple in this deal,” said Bajarin in an email reply to questions. “It seems this is largely focused on helping Lenovo accelerate their U.S. presence in smartphones, which, even with the acquisition of Motorola, is no guarantee. They still have to foster and invest in the brand and the technology.”
Much of the thinking behind the “nothing to see here” outlook for Apple stems from the Cupertino, Calif. company’s focus on the premium part of the smartphone market. The success of Apple’s flagship iPhone 5s, to the detriment of the lower-priced iPhone 5c—which prompted investors to punish the stock to the tune of a 9% downturn since its earnings call this week—was proof of Apple’s strategy.
Apple and its prime rival in that slice of the business, Samsung, take the vast bulk of all smartphone profits; analysts don’t see Lenovo straying into that space, not with the acquisition of Motorola, which Google was pushing into the lower-priced tiers even before it dumped the unit.
Nguyen did not view Google’s sale as aimed at reining in Samsung, which accounts for the biggest part of all Android-powered smartphone sales. And Bajarin rejected the idea that Lenovo-plus-Motorola would significantly affect Samsung.
“This move seems to be mostly U.S.-based and Samsung is already having some issues in this market versus others,” said Bajarin. “But it has a strong brand and is doing well as a number 2 in the U.S.” Apple is the largest smartphone maker as far as U.S. sales are concerned.
But Lenovo’s acquisition will spark increased competition in the U.S., Bajarin predicted.
Sameer Singh, an independent analyst who covers mobile technology on his Tech-Thoughts website, echoed that, but expanded the field of play to also include Europe, where Android dominates, Apple’s iOS is No. 2, and Microsoft’s Windows Phone made some headway in 2013.
“Once [Lenovo’s] pipeline is ready, I expect competition in the U.S. and European markets to intensify,” said Singh in an email. “Apple and Samsung’s Q4 results have already shown that they’re losing potential ‘low-end’ buyers within the premium smartphone space. Recent pricing changes at T-Mobile and AT&T also had an impact there. This deal will only accelerate that trend.”