Lenovo's ambitious smartphone, server deals fraught with challenges

After landing its biggest-ever corporate acquisition, computer giant Lenovo faces the daunting task of swiftly integrating and turning around the fortunes of Motorola Mobility's loss-making smartphone business, while also merging the low-end server division of International Business Machines.

Lenovo, the world's largest supplier of personal computers, announced last Thursday it had agreed to acquire Motorola Mobility from Google for US$2.91 billion, which followed the company's deal to buy IBM's commodity server business for US$2.3 billion on January 23.

Those two United States-based acquisitions, which are both subject to regulatory approvals, would transform Lenovo, respectively, into the world's third-biggest smartphone maker and third-largest supplier of so-called x86 general-purpose servers used by companies and inside data centres.

Despite the optimism expressed by Lenovo's senior management about simultaneously absorbing two major operations, analysts see the road to integration being fraught with tough challenges.

Alberto Moel, a senior analyst at Bernstein Research, said on Thursday: "At this point, we believe Lenovo may have bitten off more than it can chew."

"The investment in manpower, financial resources, and care and feeding required to make Motorola Mobility a success seems high," Moel said. Those factors may also be a concern for the IBM server deal, but Moel pointed out there was "much to like" in that enterprise-focused business.