Dow Jones /Beijing/Las Vegas


After gulping down Motorola Mobility and an International Business Machines Corp unit last year, Lenovo Group Ltd Chief Executive Yang Yuanqing has turned his attention to digesting.
“Now we need to pay more attention to the integration,” said Yang in an interview with The Wall Street Journal at the annual Consumer Electronics Show, the world’s largest gadget convention.
Lenovo spent about $5bn last year to buy the Motorola smartphone business and IBM low-end server unit, which boosted the Chinese electronics maker to No. 3 in both categories globally. Its core business remains personal computers, and it is the world’s top PC vendor by shipments.
This year will be critical for Lenovo to solidify its new holdings and quell the naysayers, who argue the Chinese company overpaid for Motorola. If he succeeds, Yang will have turned Lenovo into China’s first true global powerhouse, with a sizable presence in multiple sectors.
A first step is reintroducing Motorola back to China. Motorola said on Tuesday it will sell the Moto X and two other smartphone models in China from February.
Yang said the company plans to make Motorola an online-marketed brand in China. This would position it as Lenovo’s horse in the fierce contract-free race currently led by Xiaomi Corp, the world’s largest tech startup with a valuation of more than $46bn. Lenovo-brand phones will continue to be sold through carriers.
“There will be a separation,” he said. “Lenovo will continue to focus on the carrier market, so probably mainstream to entry level (prices). Motorola will focus more on the open market and online sales...the premium and mainstream price bands.”
Lenovo is also counting on the Motorola brand to carry its sales in countries such as the US, where Lenovo phones have previously had limited presence, Yang said.
While Yang doesn’t expect Motorola to be profitable for four to six quarters, he reaffirmed the new server unit from IBM should turn a profit within the first year. Lenovo will also save costs on the server business because of overlapping components with its PCs, he said.
The acquisitions put Lenovo on the path of clearing $40bn in revenue this year, as the company marches toward  Yang’s long-term goal of $100bn, said Lenovo Chief Operating Officer Gianfranco Lanci. Lenovo posted a record $38.7bn in revenue in 2014.
Lenovo executives said they were aware of the many potential pitfalls for integrating acquisitions.
“Look at PC history,” said Lanci, who was president of Taiwanese PC maker Acer Inc when it acquired US computer maker Gateway Inc in 2007. “Most of the acquisitions have been failing simply because people have not been able to understand other people’s culture.” He mentioned Samsung Electronics Co’s purchase of US PC maker AST Research Inc in the 1990s, which ended with AST’s closure after Samsung couldn’t make it profitable.
But Lanci said Lenovo’s 2005 acquisition of IBM’s PC unit had succeeded, in part, because of Yang’s willingness to listen and learn, rather than just giving orders. He said Yang made the rare move of relocating from his home country, China, to the US for several years following the deal to learn English and better understand the IBM PC business.
Yang said last year’s deals fulfill a long-held goal for Lenovo to expand beyond PCs.
“These acquisitions can help build our brand,” he said.