Lenovo is getting back into the mobile-phone business in China, according to the Wall Street Journal. One has to wonder whether that was the plan all along.
In 2008, Lenovo withdrew from the handset market, selling Lenovo Mobile for $100 million to group of investors led by Lenovo Holdings Ltd., the private equity arm of Lenovo’s parent, Legend Holdings Ltd. Back then, the rationale for the divestiture was that Lenovo wanted to place singular emphasis on its execution in the personal-computer business.
Then and now, though, Lenovo had to realize that the handset market in China would be a fast-growing, potentially lucrative market for many years to come. Run as a separate entity, Lenovo Mobile prospered, now ranking third by unit shipments in China’s mobile-handset market.
What’s more, Lenovo Mobile apparently got its financial house in order after leaving the official Lenovo fold. That’s one of the reasons Lenovo has decided to buy it back with for $200 million in cash and shares sourced from “internal resources.” The main reason, of course, is that the Chinese cell-phone market is an ever better place to be now than it was in 2008, which — even for the those afflicted with attention-deficit disorder — wasn’t that long ago.
Lenovo has a prototype mobile Internet device (MID) in the works, and Lenovo-branded handsets will be released shortly. Again, it makes one wonder whether the spin-out-to-spin-in strategy wasn’t in the playbook from the outset.