Lenovo hunts for promising I.P. buys
Wary of the acrimonious patent and copyright disputes in its industry, computer maker Lenovo has begun targeting acquisitions that could provide key intellectual property (IP) to help develop its nascent business in smartphones, media tablets, and internet-linked 'smart' televisions.
'We are looking at a number of technology companies,' said chief financial officer Wong Wai-ming, who declined to identify the targets.
Lenovo, the world's second-largest supplier of personal computers, is betting big on the growth potential of its fledgling mobile, internet and digital home business (MIDH) division, which was established in January last year to initially compete on the mainland against other consumer electronics brands.
Last month the firm committed to invest 5 billion yuan (HK$6 billion) to build a new industrial base in Wuhan, the capital of Hubei province, to produce smartphones and other so-called mobile internet devices for the domestic and world markets. The facility will open in October next year.
'IP is very important for us to grow outside of [mainland] China,' Wong told the South China Morning Post. 'We are looking in areas that give us an opportunity to buy, at the right valuation, certain technologies in which we are not particularly strong at the moment,' he said.
'Obviously, the IP should cover technologies that would add distinguishing features and a better user experience to our products.'
Hong Kong-listed Lenovo's MIDH division accounted for 5 per cent of its record US$29.6 billion revenue in its last fiscal year that ended on March 31.
It capped the year as the mainland's No4 supplier of smartphones, with a 9.5 per cent share in the quarter to March, and No2 provider of media tablets, with a 17.2 per cent share. Wong said Lenovo was well aware of the high-profile IP disputes in its industry, which has prompted Lenovo to 'firm up its IP position and cross-licensing arrangements with other brands'. 'We take this matter very seriously,' he said.
Apple, the maker of the popular iPhone and iPad, is locked in separate IP lawsuits against Samsung Technology and HTC. Google, developer of the Android operating system, is battling Oracle, while Microsoft has tangled in court with Motorola Mobility.
A significant chunk of Lenovo's existing IP portfolio came from its US$1.75 billion purchase of IBM's personal computer division in 2005. Lenovo bought Seattle-based Switchbox Labs, a secretive start-up that focused on developing new consumer technologies, for an undisclosed amount in 2009.
Last year, Lenovo paid about Euro466 million (HK$4.5 billion) to acquire German consumer electronics firm Medion. It also invested US$175 million in a joint venture in Japan with NEC.
Yang Yuanqing, Lenovo's chairman and chief executive, predicted last month that the firm would triple the volume of its smartphone sales on the mainland, the world's biggest mobile phone market, in its current fiscal year to March. Lenovo smartphones and smart televisions are sold only on the mainland, while its media tablets are also available overseas.
Bernstein Research senior analyst Alberto Moel said in a report that Lenovo's MIDH division 'remains unprofitable even as it reaches scale'. He rated the stock 'market perform', which is a neutral assessment, and set a target price of HK$6.30 a share.