Seeking Alpha
Foreign companies, long only, tech
Profile| Send Message|
( followers)  

PC giant Lenovo (OTCPK:LNVGY) has never been a company to sit still for very long, which is both a positive and negative trait, as it announces yet another new foray into the smart devices sector. The company's inability to be satisfied with the status quo has helped propel it to the world's top PC maker through a series of acquisitions over the last few years, making it one of China's best known global brands. But that same inability to focus also means Lenovo is constantly venturing into new areas, both for products and geographies. Some of those look good, but many often lead to headaches and disappointment.

The latest move will see Lenovo start off making smart air purifiers, smart glasses, and smart routers in the first phase of its campaign into such devices. (Chinese article) Lenovo would work with third-party manufacturers and designers in all 3 areas, and would use its extensive resources to promote and distribute the products, the reports say.

Let's look quickly at each of these 3 product areas, as all are quite different and have varying degrees of relevance to Lenovo's core PC and cellphone businesses. Air purifiers look like the most distant relative to Lenovo's current businesses, as such devices don't rely heavily on computing power or wireless communications. But that said, this is certainly a product category with huge potential due to growing consumer awareness about air pollution in China.

Whether or not Lenovo is the right company to sell these devices is a different matter, since air purifiers don't require a lot of intelligent functions such as the ability to turn them on and off or adjust them over the Internet. What's more, Lenovo's big strength is its vast distribution networks into China's smaller cities, which isn't really the market for air purifiers that are mostly a product for wealthier, educated people living in big cities.

Next there are smart glasses, which are one of a growing number of wearable devices that are up-and-coming globally. Google (GOOG, GOOGL) is the most famous for such glasses, and reports earlier this year indicated Google Glass might soon be coming to China. In this case Lenovo's move looks like a "me-too" bid to enter the wearable device segment. While perhaps that's commendable, I honestly don't see any Chinese consumers opting for Lenovo Glasses, largely due to the company's lack of design savvy in this kind of trendy new product area and also due to its somewhat stodgy brand image.

Lastly there are routers, which are the devices that allow computers to wirelessly surf the Internet. Lenovo is a bit late coming to this segment, as a number of other major tech firms including security software maker Qihoo 360 (NYSE:QIHU), smartphone maker Xiaomi and leading search engine Baidu (NASDAQ:BIDU) have all entered the space over the past year. (previous post) But given the widespread use of routers and their close association with computers, this is possibly one area where Lenovo might have the best chance of success.

Lenovo's push into these new devices looks somewhat similar to another trend that saw PC and cellphone makers pile into TVs nearly a decade ago, around the time when flat screen models were making their big rise. That campaign saw names like Hewlett-Packard (NYSE:HPQ) and Motorola all enter the business, only to eventually drop the product line when it became clear they couldn't compete with the more established TV makers.

Lenovo already has its hands quite full with several major acquisitions and new product initiatives, including its pending purchases of IBM's (NYSE:IBM) low-end server business and Google's Motorola Mobility cellphone unit. It also needs to focus more on its own cellphones, which are quickly gaining a reputation as cheap and unreliable products - not exactly the image it wants to cultivate if it someday hopes to compete with Apple (NASDAQ:AAPL) and Samsung (OTC:SSNLF). Against that backdrop, this move into smart devices looks like yet another unneeded distraction, and one that's likely to end mostly in failure.

Bottom line: Lenovo's foray into smart air purifiers, glasses and routers will distract it from many more important tasks at hand, and are likely to end in failures.

Disclosure: None

Editor's Note: This article discusses one or more securities that do not trade on a major exchange. Please be aware of the risks associated with these stocks.

Source: Lenovo Expands Into Smart Devices