Lenovo continues acquisition hunt

As smartphones and tablets top PC sales, the Chinese tech company looks to expand in these areas.

By Benzinga Aug 15, 2013 3:28PM
 Image Source, Image Source, Getty ImagesBy Louis Bedigian

Lenovo (LNVGY) is making headlines Thursday after reiterating its mission to acquire major businesses within the smartphone and PC sectors.


In January, a Lenovo CFO Wong Wai Ming revealed that the company was looking at "all opportunities" -- including BlackBerry (BBRY), known as Research In Motion at the time (Benzinga).


Lenovo quickly downplayed reports that it would buy BlackBerry, but that didn't stop investors from taking notice. After all, this could be the takeover of a lifetime for those who are long BlackBerry.


Several months have passed since Ming's statements, but Lenovo wants its investors to know that the company still plans to make a major acquisition.


"We are definitely seeking opportunities in both the PC and phone areas," Lenovo CEO Yang Yuanqing told Bloomberg. "The industry is in a period of consolidation, so we definitely should take the opportunity if we can find the right target."


Yuanqing's statement came after the company announced that PC sales have been exceeded by those for smartphones and tablets.


According to CNET, the company's profit increased 23% during the fiscal 2014 first quarter. Lenovo's net profit jumped to $174 million versus $141 during the year ago period, beating Wall Street's estimate by $7 million.


Lenovo more than doubled its smartphone shipments, sending 11.4 million units to retail last quarter. When combined with tablet sales, Lenovo's mobile electronics proved to be the company's most important assets.


This is an interesting twist in the sales equation, especially after Lenovo successfully outsold Hewlett-Packard (HPQ), the former world leader in PC sales. HP is expected to take back the sales lead this quarter, but that lead may not last if tablets continue to replace PC sales (Benzinga).


Thus far, none of HP's tablets have become massive sellers. When the company tried its hand at developing an iPad competitor to fend off Apple (AAPL), it sold so poorly that HP reduced the price by 80%.


Its latest tablet, the Slate 7, recently dropped from $169 to $139. The price is listed as a "sale," but the reduction has been in place for several weeks.


Lenovo is taking a different strategy. Instead of waiting for sales results to dictate the price drop, the company has already taken $120 off of its upcoming Windows 8 tablet/laptop hybrid (Lenovo.com).


Disclosure: At the time of this writing, Louis Bedigian had no position in the equities mentioned in this report.


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1Comment
Aug 15, 2013 5:42PM
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Lenovo is agnostic about selling Android and Windows devices to fans of each ecosystem just like Intel is agnostic about selling chips to Android, Apple and Windows device makers. Dell's the one taking the brunt of the PC fallout and thus it's going private.  Lenovo would buy Nokia before Blackberry but it may have to beat Microsoft to the jewels. Let's see what Intel's Silvermont looks like on 9/10-11 and then place your bets.
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