Lenovo Looking To Have The Last Seat When The Music Stops
Stephen Simpson, CFA • 10 Comments
Stephen Simpson, CFA • 10 Comments
Lenovo Facing Headwinds, But Managing Them Well
Stephen Simpson, CFA
Stephen Simpson, CFA
Sep. 29, 2014, 2:00 AM
- Lenovo (OTCPK:LNVGY) will complete its $2.1B acquisition of IBM's (NYSE:IBM) x86 server unit on Oct. 1, giving China's biggest personal computer maker a major asset to expand its business client offerings.
- The closing purchase price is lower than the $2.3B valuation announced in January because of a change in the valuation of inventory and deferred revenue liability, says Lenovo.
Aug. 15, 2014, 4:20 PM
- The U.S. Committee on Foreign Investment (CFIUS) has signed off on the $2.3B sale of IBM's x86 server unit to Lenovo (OTCPK:LNVGY).
- The deal had been closely scrutinized due to the division's sales to U.S. government clients, sales which have included a decent number of supercomputer deals. IBM has tried to soothe concerns in part by promising it would continue handling maintenance work on Lenovo's behalf "for an extended period."
- Chinese regulators cleared the deal in July. Ahead of the sale, IBM's x86 server revenue fell 3% Y/Y in Q2, a much smaller decline than Q1's 18%.
Jul. 28, 2014, 6:11 PM
- Long-struggling Motorola Mobility could see its phone sales double in 2014, according to internal projections uncovered by The Information. The projections also suggest Motorola, which lost $1.2B last year amid ongoing Android share losses, could turn profitable by mid-2015.
- The projections could suggest Motorola's attempts to move downmarket by launching emerging markets-focused phones such as the Moto E and Moto G have paid off. Its attempts to challenge Samsung and Apple on the high-end with the Moto X fell flat.
- Lenovo (OTCPK:LNVGY), set to pay $2.91B to buy Motorola (while keeping Motorola's brand in the U.S. and certain other markets), must be pleased with the forecasts. As it is, Lenovo aims to ship 80M smartphones this year, up sharply from the 45.5M IDC estimates the company shipped last year.
- The Information also backs up a recent report stating Google and Motorola are working on a 5.9" Nexus phablet appropriately codenamed Shamu. Notably, Google didn't work with Motorola on Nexus hardware prior to the Lenovo deal, as its Android unit tried to placate nervous OEM partners by keeping the Motorola unit at arm's length.
Jul. 4, 2014, 4:42 AM
- Lenovo's (LNVGF) $2.3B deal for IBM’s (IBM) low-end server business has been approved by the the Chinese Ministry of Commerce's anti-monopoly bureau.
- The acquisition is still awaiting approval in the U.S., as the Committee on Foreign Investment in the United States investigates possible American national-security risks under the proposed deal, including concerns of the Pentagon's use of IBM servers.
Mar. 20, 2014, 5:42 PM
- Lenovo (LNVGY) is buying 21 patent families from Unwired Planet (UPIP), including ones related 3G and 4G networks.
- The deal gives Lenovo, now the world's #5 smartphone vendor (could be #3 after the Motorola Mobility deal closes), more negotiating leverage in cross-licensing deals.
- Unwired Planet says it will still have 2.5K issued and pending patents once the deal closes. The company's market cap was only $142.4M as of today's close.
- CC at 8:30AM ET tomorrow.
Mar. 18, 2014, 1:39 PM
- "We will continue to use acquisitions as a means to grow ... Whenever there is a good opportunity, we will grasp it," says Lenovo (LNVGY, LNVGF) CEO Yang Yuanqing. The remarks come with the ink barely dry on Lenovo's $2.9B deal to acquire Motorola Mobility from Google, and its $2.3B deal to buy IBM's x86 server unit.
- Lenovo will still have $2B in cash after accounting for the cash portions of the Motorola/IBM deals, and is thinking of taking advantage of low interest rates to raise more capital. With the company about to become a major server vendor, Lenovo could go shopping for businesses in complementary enterprise markets (storage, networking hardware, IT services, etc.).
- Yang also insists Lenovo will try to make Motorola profitable by leveraging its economies of scale, rather than further trimming headcount. Motorola has already seen massive job cuts in the Google era.
Feb. 7, 2014, 3:19 AM
- Reports that Google (GOOG) has purchased a 5.94% holding in Lenovo Group (LNVGY) for $750M are incorrect, the re/code Web site says.
- Re/code writes that the reports were due to a misreading of a filing by Reuters.
- Google is due to receive $750M worth of Lenovo shares as part of the deal to sell its Motorola handset division to the Chinese company for $2.91B in cash and stock.
Feb. 4, 2014, 12:37 PM
- The Nikkei reports Sony (SNE +5.1%) is in talks to sell its Vaio PC unit, and is looking to receive ¥40B-¥50B ($394M-$492M).
- The report follows one over the weekend stating Lenovo (LNVGY), which last month struck deals to buy Motorola Mobility and IBM's x86 server unit, is in talks to acquire Sony's PC ops. Sony called the report inaccurate, but admitted it's exploring options for the business.
- Sony shares have shot higher on the Nikkei's report. Investors like the idea of unloading a loss-generating unit that has struggled to deal with declining PC sales and tough competition from Lenovo, H-P, and others. The company's FQ3 report is due on Thursday morning.
- Thanks to both the Sony report and a massive equity selloff, Lenovo shares are down 16% in Hong Kong over the last two days.
Jan. 31, 2014, 7:20 PM
- After taking in Google's (GOOG) Q4 numbers, FBR estimates handing off Motorola Mobility to Lenovo (LNVGY) could boost the Web giant's op. margin by as much as 500 bps. Whereas Google proper has an op. margin of 34%, Motorola's losses dragged down the company's total op. margin to 29%.
- TechCrunch reports that with Motorola gone, newly-acquired Nest will serve as Google's primary hardware team. Nest, founded by iPod "godfather" Tony Fadell, will reportedly develop gadgets very different from the smart thermostats/smoke alarms it's known for.
- Many observers think the Lenovo sale is at least partly tied to Google's recent deals with Samsung (SSNLF). The reasoning: Samsung's reported willingness to embrace a vision of Android closer to Google's (toning down support for custom apps/UIs, and promoting Google apps/services) is linked to Google's decision to sell its mobile hardware unit.
- It's possible Google also gave Samsung favorable terms in their recent cross-licensing deal. In terms of patent portfolio/breadth, Google held the upper hand.
- In addition to keeping most of Motorola's patents, Google is holding onto the company's Advanced Technology unit, which is responsible for the Project Ara modular phone initiative.
- Lenovo says it will keep the Motorola brand in the U.S., and that it aims to eventually pass Apple and Samsung to be the world's largest smartphone vendor.
- Previous: Google earnings coverage
Jan. 29, 2014, 5:25 PM
- Just an hour after reports emerged Google (GOOG) is set to sell Motorola's phone ops to Lenovo (LNVGY), the deal has been announced by Larry Page. Lenovo will pay $2.91B for the struggling, loss-generating smartphone maker; Google will retain the "vast majority" of its patents.
- Page explains the deal by stating the smartphone market is "super competitive," and that "it helps to be all-in." He promises the sale doesn't have broader implications for Google's hardware efforts.
- Google paid $12.5B for Motorola Mobility in 2011. After backing out the Lenovo sale, the Arris sale, and $3.5B in cash, Google effectively paid ~$3.7B for Motorola's patents, assuming one doesn't count the losses the phone unit has produced under Google's control.
- The sale expands Lenovo's U.S. presence, and gives it access to Motorola's respected hardware engineering teams as it tries to grab high-end Android share from market leader Samsung (SSNLF). IDC estimates Lenovo had a 4.9% smartphone share in Q4 (up from 4.1% a year ago).
- The deal also removes a point of friction between Google and its Android partners. It shortly follows a report stating Google has pressured Samsung to tone down its Android UI changes and more strongly emphasize Google's apps/services, as it tries to exert greater control over Android's look and feel.
- GOOG +2.2% AH. In addition to the Motorola deal, shares could be getting a lift from Facebook's Q4 beat.
Jan. 29, 2014, 4:19 PM
- Reuters and China Daily both report Lenovo (LNVGY) is set to buy Motorola Mobility's phone unit from Google (GOOG). The former says the price tag is close to $3B; the latter says it's "at least" $2B. China Daily says the deal will be announced tomorrow morning in Beijing.
- Motorola Mobility has been bleeding share and (in spite of huge job cuts) posting big losses since Google's 2011 acquisition, as products such as the Moto X and Moto G fail to produce a turnaround in the face of stiff high-end competition from Samsung and Apple, and stiff low-end competition from a slew of Asian OEMs (including Lenovo).
- Google has already sold Motorola's set-top/cable infrastructure unit to Arris for $2.35B. The company will presumably hold onto Motorola's sizable mobile patent portfolio.
- Investors are pleased, GOOG +1.2% AH. Q4 results are due tomorrow.
Jan. 22, 2014, 6:55 PM
- The WSJ reports Lenovo (LNVGY), once the buyer of IBM's PC unit, is now close to acquiring its x86 server ops. Sources state a deal could be announced as soon as tomorrow.
- No word on price; "interested parties" not named Lenovo reportedly valued the unit at $2.5B when IBM shopped the business last year, but its recent performance might spell a lower price tag.
- Big Blue reported yesterday its x86 server sales fell 16% Y/Y in Q4; that was actually better than the 26% drop reported for hardware/chip sales overall. The business has been pressured by fierce competition from H-P and Dell, and the use of white-label hardware by Web/cloud giants.
- Selling the x86 unit would continue a long-term trend by IBM of unloading lower-margin hardware businesses in order to focus on software/services. It would also strengthen a balance sheet that has been dinged by huge buybacks and declining free cash flow (-18% Y/Y in 2013).
- Previous: Lenovo reportedly in talks to buy x86 unit
Jan. 20, 2014, 9:58 PM
- Lenovo (LNVGY, LNVGF) is in talks to buy IBM's low-end x86 server business, and a deal could be signed within weeks, Bloomberg reports.
- The two companies were said to be negotiating a deal for the division last year, but no agreement was reached on a price.
- Lenovo said today it’s in preliminary discussions on some kind of possible acquisition, but it did not identify the target or seller.
- Dell also may be among potential buyers, but it's not clear how seriously it is considering an acquisition.
Oct. 18, 2013, 1:58 AM
- Lenovo (LNVGF.PK) will probably just try to acquire parts of BlackBerry (BBRY) rather than the whole company, Reuters reports, due to regulatory concerns.
- The news agency's article is in contrast to a WSJ report that said that the Chinese computer maker is "actively considering a bid for all of BlackBerry."
- Reuters didn't specify what the regulatory concerns are but did cite experts who believe that BlackBerry's secure network would probably be sold to a North American buyer because of security issues, especially as the U.S. government is a major customer.
Oct. 17, 2013, 3:49 PM
- Sources tell the WSJ Lenovo (LNVGY.PK) is "actively considering a bid for all of BlackBerry (BBRY +0.2%)," not just parts of the company, as is reportedly the case for other tech names.
- "Goodbye U.S. gov't contracts," quips Dan Primack. Given the roadblocks extended to Huawei and ZTE by U.S. politicians and regulators, and general concerns about hacking incidents blamed on the Chinese government, it's safe to assume any Lenovo bid for the whole of BlackBerry would receive intense scrutiny.
- Earlier: Lenovo reportedly signs NDA with BlackBerry
Oct. 17, 2013, 2:48 PM
- Dow Jones reports Lenovo (LNVGY.PK) has signed an NDA to look at BlackBerry's (BBRY +1.6%) books. The report comes two days after one from Bloomberg indicating an NDA has been signed with Cerberus.
- Lenovo has been featured in BlackBerry M&A speculation more than once this year, in part due to comments from Lenovo execs. But the Chinese PC/smartphone vendor's relatively small market cap could be an issue, as might national security concerns (should Lenovo want to acquire BlackBerry's network).
- BlackBerry has rallied a bit on the report.