CELLPHONES: TCL, Lenovo Try To Rejuvinate Palm, Moto
Bottom line: TCL and Lenovo will face uphill battles in rebuilding the Palm and Motorola brands due to stiff competition and lack of experience building upscale brands.
It’s no secret that PC giant Lenovo (HKEx: 992) has big plans for its recently acquired Motorola smartphone brand, and now we’re learning that cellphone stalwart TCL (HKEx: 2618; Shenzhen: 000100) has similar plans for the former superstar Palm brand. That’s the latest word coming from Las Vegas, where Lenovo, TCL and other Chinese gadget makers are showing off their latest wares at CES, the world’s biggest consumer electronics show that happens this time each year. While TCL was low-profile about its newly acquired Palm brand, Lenovo was much louder about its plans to relaunch Motorola smartphones in its home market next month.
I find this recycling of former major western brands by Chinese manufacturers quite amusing, as it resembles a sort of “second chance” for these names that were once pioneers in their fields but later failed to keep up with the latest trends. We saw a similar trend several decades ago when Korean companies picked up faded US TV brands like Zenith, which never really made a comeback under its Asian ownership.
It’s obviously too early to predict whether Moto and Palm will suffer a similar fate, though my preliminary prediction is that they will. The reason is relatively straightforward, namely that there’s more to a brand than just a name. Motorola and Palm both were industry leaders in their heyday, known for their cutting-edge and trendy cellphones and personal digital assistants, respectively. TCL and Lenovo are known for many things, but trendiness and cutting edge products aren’t among those.
Let’s begin with TCL, which is no stranger to foreign brands. The company’s past experience with such brands dates back about a decade ago, when it acquired several European brands for its cellphone and TV division from French firms Alcatel and Thomson, respectively. Neither of those purchases did well, though TCL continues to use Alcatel as one of its major brands for sales outside China.
Now media are reporting the company has purchased the Palm brand from its former owner Hewlett-Packard (NYSE: HPQ) for undisclosed terms. (English article; Chinese article) TCL made the announcement in a low-key statement at CES, and wasn’t discussing its new plans for Palm. But people are expecting TCL will use Palm as a mid- to high-range brand both at home and abroad.
I have a lot of respect for TCL, which was one of China’s earliest successful tech companies and one of the few survivors from previous booms in domestic cellphone and TV manufacturing. But I have serious doubts about whether it can succeed where even a major company like HP failed, and doubt it will be able to resuscitate Palm.
Meantime, let’s look quickly at Lenovo’s plans for Motorola, after it closed its purchase of the iconic but faded US brand late last year. Lenovo has been quite talkative at CES, and says it will launch 3 Moto models in China starting next month, bringing the brand back to a market that Motorola once dominated alongside the equally faded Nokia. (Chinese article) The relaunch will begin with a roll-out for the Moto X in February, followed by the Moto G and Moto X Pro a month later.
I personally haven’t used these phones, so can’t attest to how good they are or how likely they are to find an audience. They’ll have several advantages, including their positioning as mid-range models that are a step above the low-end ones currently flooding the market. Motorola is also still remembered as a good brand by many Chinese, and the phones should get good distribution through Lenovo’s extensive sales channels. Still, with newer trendier names like Xiaomi, Oppo and Coolpad flooding the market, I honestly can’t see Motorola finding a significant place for itself in China again.
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