While many investors like Lenovo Group Limited (HKG:0992), Arete Research Services LLP Senior Analyst Nam Hyang Kim is bearish on the stock. He says many investors are attracted to the well-known Chinese brand because it generates good margins in the PC market.
“We believe the big mistake Lenovo made was to acquire Motorola Mobility,” Kim says. “The last time Motorola made money was before the iPhone launch, which was a long time ago, and then Motorola went through a series of restructuring.”
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Kim says other PC makers that have tried to transition to the mobile space have failed. He believes that Lenovo’s transition, using Motorola to lead the way, may fail as well.
“Nobody really cares about the Motorola brand anymore, but Lenovo thinks it is still a good brand and that it still has name recognition,” Kim says. “Motorola also has a very high cost structure. They are not profitable and have not been profitable for a long time.”
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