COMPUTERS: Lenovo To Clean Up Crowded Brands
Bottom line: Lenovo’s branding relaunch set for April could see it retire some of its local brands obtained through recent acquisitions, helping to improve its sales through better consumer awareness.
PC maker Lenovo (HKEx: 992) is hinting at a major overhaul for its crowded stable of brands later this year, in a move to simplify the many names it has acquired in a buying spree over the last decade. This kind of move is long overdue for Lenovo, which launched its global buying binge a decade ago with a landmark deal to buy the PC business of IBM (NYSE: IBM). To this day Lenovo still counts the Think name it got from IBM as one of its leading PC brands, though it has also added a number of other major names over the last 10 years.
The hints at a brand overhaul came from David Roman, one of Lenovo’s top US executives and its chief marketing officer, during an interview at CES, the world’s top gadget trade show taking place in Las Vegas this week. In the interview, Roman discussed the current confusing situation that has Lenovo selling products under a wide range of brands. (Chinese article)
He didn’t give any big details about the branding overhaul, though he did disclose an announcement will come in April. He further commented that a main strategy of the overhaul will be simplification, implying that some of Lenovo’s less well-known names could be quietly phased out in favor of a more unified branding strategy. Such a strategy has worked well for global names like Apple (Nasdaq: AAPL) and Hewlett-Packard (NYSE: HPQ), which often quickly rebrand their acquisitions after a major purchase to create a unified image and avoid consumer confusion.
All that said, let’s quickly review some of the biggest purchases Lenovo has made over the last decade and predict which might be retired with this upcoming overhaul. Following the IBM PC deal in 2005, the company took over the PC business of Japan’s NEC (Tokyo: 6701) in 2011 through a joint venture. That same year it also acquired German PC maker Medion. Both names were leaders in their respective markets, and remain active to this day.
In 2012, Lenovo also made a big push into Latin American with its purchase of Digibras Industria, a leading Brazlian PC and gadget maker. Last year it was in the headlines with 2 more big acquisitions, starting with the purchase of IBM’s low-end server business. That was quickly followed by its recent purchase of faded cellphone maker Motorola.
The management of so many major brands in so many markets looks complicated, costly and inefficient, especially compared with names like Apple and Samsung (Seoul: 005930) that are known under a single brand name globally. Of the brands now in its stable, only Think and Motorola enjoy global recognition, and Digibras, Medion and NEC are largely limited to strong reputations in their home markets.
Accordingly, I could imagine the Medion and Digibras brands being retired under the upcoming overhaul. The NEC name might be more painful to discard due to a strong preference for domestic brands by Japanese consumers. But if I were Lenovo, I would take that difficult step as an important investment in the future. The company is holding out big plans for Motorola as its higher end brand for its future cellphone business, meaning we’re unlikely to see that one retired under the overhaul.
At the end of the day, I expect we’ll see the company place more emphasis on its main Lenovo name, and subordinate most of its other brands under that. That would be similar to Apple and its iPhone name, and Samsung with its Galaxy brand. Such a strategy could disappoint fans of names like Medion and NEC, which would be relegated to the pages of high-tech history. But new brands come and go quite regularly in the fast-changing high-tech world, and Lenovo would be wise to retire many of its regional names in favor of a more unified global strategy.
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