Wednesday, February 6, 2008

Lenovo Mobile exiting the business for $100 million

What do you do when you have 6% of the mobile phone market share in China? You exit business. This is exactly what Lenovo just did this week. The had decided to exit the money losing mobile phone business to continue focusing on their profitable PC business.

What happened to the myth of companies who just wanted 1% of the market share in China? This is certainly 1 point to prove that doing business in China isnt easy at all especially in the crowded mobile phone business. Foreign firms dominate at the high-end of the market with advanced models, and also have the scale to offer low prices at the market entry-level, leaving the 80 or more licensed domestic manufacturers to slug it out in the mid-range.

Lenovo sold their mobile phone arm for $100 millon after a disastrous quarter in which sales fell 31%. Even with 6% market share, Lenovo Mobile had made a loss of 133.7 million yuan in the year ended December 31, 2007, compared with 426 million yuan profit in 2006 thanks to a sharp 31% drop in sales in the last quarter. Tough business aint it?

2 comments:

fed said...

I think it is a strategic wise decision to withdraw from a low profit competitive market to concentrate on High profit PC business.

Alvin Foo said...

Definitely a wise move for lenovo after all mobile is not the core and its best for them to focus on their main pc business.

Pc is equally a tough business with razor thin margin too but the bottom line is to focus on what a company do best and for lenovo pc is the bread and butter.