Need more evidence that smartphone prices are about to tank? Look no further than Lenovo’s announcement on Wednesday to buy Motorola from Google for $2.9 billion. While the deal gives the Chinese company its long desired presence in the Western smartphone market, it also represents a looming commoditization. The rule of thumb with Lenovo is: when the company comes knocking, your product is probably about to jump the shark, if it hasn’t already.
Lenovo’s most famous purchase came in 2004, when it announced it was buying IBM’s PC division and ThinkPad brand for $1.7 billion. PCs were already commodified by that point, with prices and profits going nowhere but down. IBM wisely saw the writing on the wall and got out while the getting was… well, not good, but at least doable.
The question everyone was asking was why would anyone want to buy a sinking ship? Lenovo’s executives had a simple answer: they wanted to become China’s first international brand. The profit margins on PCs were shrinking, but everybody still needed them, so what better way to familiarize the world with the Lenovo brand than with a ubiquitous product? Read the rest of this entry »