TAIPEI (TheStreet) -- For several years Chinese leaders have nudged the country's top companies to sustain themselves by looking for business overseas. Offshore business eases reliance on a competitive home market and advances the Communist Party goal of China's gentle global expansion through economic clout.
A lot of Chinese companies have ventured overseas, but their missions often get moored in the emerging markets of Africa or Southeast Asia. One, however, has taken two big wholesome bites into the United States. That's Lenovo (LNVGY).
In 2005 Lenovo bought the PC unit of IBM (IBM) and said last month it would grab the American computer maker's low-end server business. More significantly, last month the Chinese consumer hardware maker bought Motorola Mobility for $2.9 billion from Google (GOOG). That makes Lenovo the world's third-biggest smartphone vendor once the deal gets full regulatory approval.
I've signaled Lenovo's strength before. Now its move on Motorola Mobility offers more cause to feel good about investing in the Nasdaq- and Hong Kong-traded Lenovo that has escaped the trap of its Chinese peers.
Lenovo has scored in the United States through global marketing, a clean reputation -- consider blacklisted Huawei and ZTE for contrast -- and overall business efficiency. On the last point, consider that Google paid $12 million for the same Motorola Mobility two years ago.
"In recent years, Lenovo has been strategically aggressive," Taipei-based market research firm TrendForce says in a Jan. 30 note. "With its wealth of financial resources and greater ambitions than its industry peers, it has focused its efforts on directly purchasing existing brands to expand its market share, providing Lenovo with the critical factor for its growth leaps seen in its targeted purchases."
The acquisition of Motorola Mobility, incidentally, happens to make a lot of sense.
Lenovo gets more access to consumers in the mature United States and fast-growing Latin America, market research firm Strategy Analytics says on its blog. More than 80% of Lenovo's sales today come from China, but its post-purchase 6% world smartphone market share will "instantly" fall in line behind only Samsung with 32% and Apple (AAPL) with 15%, according to the research firm.
Motorola, in turn, can strengthen its position in Lenovo's home country, where it has sold handsets long before the arrival of smartphones. Rivals "worried" by the Lenovo-Motorola deal include China's Huawei (002502.SZ), ZTE (ZTCOF), TCL-Alcatel (2618.HK) and iPhone lookalike builder Xiaomi, Strategy Analytics forecasts.
Lenovo should also leverage Motorola's edge in patents, another advantage to selling smartphones outside China. "Motorola has a lot of intellectual property, so when it's licensed for smartphones that can help Lenovo sell outside China," says Tracy Tsai, research director with Gartner in Taipei.
Lenovo, known more for making PCs than smartphones, needs whatever edge it can get in mobile devices. It's trying, alongside rivals including Acer and Asustek Computer, to recast itself as a smartphone maker to grab investor attention.
Lenovo's shares hit 14-year and nearly record highs after the Motorola acquisition was announced last month. They weren't doing terribly before the announcement. Lenovo is a safe investment in China as well as in consumer electronics.
At the time of publication the author had no position in any of the stocks mentioned.
This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.