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Lenovo to see fresh gains from AR-ready smartphone as it rides Pokemon Go bandwagon

PUBLISHED : Tuesday, 26 July, 2016, 2:50pm
UPDATED : Tuesday, 26 July, 2016, 3:06pm

Chinese technology giant Lenovo Group could see a US$1.5 billion windfall from an increased global demand for more advanced smartphones designed to run augmented reality (AR) applications, such as the Pokemon Go mobile game.

Analysts at Bernstein on Monday forecast what they described as a “super bullish” scenario for Lenovo based on the Hong Kong-listed company’s ability to ship three million of its premium, AR-capable smartphones, which cost US$500 each, in the next 12 months to meet such a demand.

“It certainly helps the turnaround of Lenovo’s mobile [business] segment,” Bernstein senior analyst Alberto Moel said in a report.

Moel pointed out that Bernstein was aggressive in its assumptions on Lenovo, in which it has an outperform rating on its stock, “so the actual effect could be much less”.

Lenovo’s shares opened at an intraday high of HK$5.29 before settling down 2.84 per cent to close at HK$5.13 on Monday.

That halted the 13 per cent rally in Lenovo’s share price since July 11, which Moel said was likely fuelled by reports the company’s new AR-ready Phab 2 Pro smartphone would improve the experience of playing Pokemon Go.

Lenovo unveiled Phab 2 Pro, the world’s first smartphone to put AR technology into the hands of consumers, at a corporate event in San Francisco last month.

AR provides an overlay of digital information – in the form of text, graphics, audio and other virtual enhancements – on to the real world, as seen from advanced smartphones, tablets and head-mounted displays which support the technology.

The lifespan of a smartphone is slightly above two years, so about 150 million [mobile AR game] players will need to replace their phone in the next 12 months
Alberto Moel, Bernstein

The Phab 2 Pro has a 6.4-inch touch display, an eight-megapixel front camera for selfies as well as a 16MP camera, an infrared camera and motion-tracking camera on the back to render 3D images.

It was co-developed with Google and its Tango technology platform, which uses advanced software and sensors to enable AR utilities and gaming features.

Lenovo expected to have 25 Tango apps ready by September, when its Phab 2 Pro will start selling for US$499, and about 100 apps by the end of this year, including a Pokemon Go-type game co-developed with Nasdaq-traded Chinese mobile game publisher iDreamSky Technology.

To estimate the active players of Pokemon Go just several weeks after its launch, Bernstein drew from the peak number of monthly active users of Rovio’s Angry Birds, which hit 250 million in 2013, and that of Zynga’s FarmVille, which reached 300 million in 2012.

“Let’s assume ... Pokemon Go’s global monthly active users will reach and stay at 300 million,” Moel said. “The lifespan of a smartphone is slightly above two years, so about 150 million [mobile AR game] players will need to replace their phone in the next 12 months.”

Moel said Lenovo could generate incremental demand for its Phab 2 Pro from a third of the estimated nine million Android-based premium smartphones sold at US$500 and above each year.

IDC analyst Bryan Ma, however, said the Pokemon Go game app, which was developed by US software firm Niantic for Android and Apple iOS smartphones, needed to run the Tango platform to take advantage of Lenovo’s Phab 2 Pro.

Ma added that the Tango platform was not exclusive to Lenovo, so other smartphone brands could also release competing devices.