Then there were three: Lenovo prepares to join the US smartphone race

lenovoI’ve been doing a bit of work researching a piece on the latest Lenovo bombshell to hit the tech world – its $2.9bn bid for Motorola Mobility. Now, in my innocence, I reckoned there might be quite a few hurdles for Lenovo on this one, but the analysts I spoke to were pretty upbeat on the deal.

Remarkably, most were pretty confident this was a good buy and that it’ll help propel the firm to third in the global smartphone stakes in a matter of a couple of year.

It’s easy to see why on paper. Here’s what Canalys APAC MD Rachel Lashford told me were the main benefits for Lenovo:

·         Immediate entry to the US market, Motorola’s major market, as well as key markets in Western Europe and Latin America.

·         A unique relationship with Google.

·         Credibility with operators and consumers worldwide.

·         Existing US operator relationships and a handful of global ones.

·         Additional experienced phone sales teams.

·         Additional and highly rated phone engineers.

·         Additional tablet and phone shipments, as it becomes the key manufacturer of Google’s Nexus line.

Hard to argue with that lot. It’s also hard to see how Lenovo could have done better than Motorola – there wasn’t much choice out there, after all (BlackBerry? HTC?). Except that doesn’t mean it’s going to be a success. Although it has high brand recognition in the US, Motorola is a fading star, with neither innovative designs or huge volume sales to its name.

I wonder then if it’s really going to give Lenovo that huge leg-up into the US smartphone space it desperately wants. I’ll be even more surprised if Lenovo merges the two brands, as various analysts told me will happen eventually, unless Plan A has succeeded perfectly.

The thing I imagined would cause the biggest potential roadblock is a US political backlash. Lawmakers can be a pretty obstinate bunch, especially when they feel their country is being invaded by ‘foreign hordes’.

It’s certainly right to say that Lenovo has a better relationship with the US government – where ThinkPads are still used – than most Chinese firms, and that consumer smartphones are hardly a national security matter, unlike telecoms infrastructure (sorry Huawei, ZTE). But I still think there’s the potential for a unwelcome bit of political interference here, especially if some more news comes to light on Chinese spying and state links to tech firms.

Given the stakes, it’s not surprising Lenovo has apparently hired some big name attorneys, some of whom have worked for the CIA and Homeland Security, to help it lobby the deal through.

Lashford even speculated that “announcing two deals in one month will ease its progress, not complicate it”. I suppose we’ll all have to wait and see on that one.

One thing’s for certain: Motorola employees will be a happy bunch. I wonder how may will be queuing up for Lenovo CEO Yang Yuanqing’s annual $3m employee bonus giveaway?


Fancy a new role in IT? Here’s what’s on offer in Asia

asiaThe start of a new year is as good a time as any to begin thinking seriously about a possible career move. Given the very early stage of economic recovery in the UK, there are limited possibilities at home, so what about taking the leap to Asia? After all, it’s one of the global economy’s strongest performing regions and in markets like China there are huge sums of public and private money being invested into IT upgrades and infrastructure projects.

Well, I spoke to several recruitment experts in China, Hong Kong and Singapore to get the low down on the opportunities, but also the challenges for job-hunting ex-pat IT pros.

First up is China. According to Michael Page senior manager Joshua Rafter the job market is stable and growing, with pharmaceutical, healthcare, chemical, retail, automotive and technology sectors growing particularly strongly. Skills in demand include business-facing roles such as project managers and business analysts.

Hong Kong is also looking pretty positive, although more so in the commercial rather than the financial sector. Roles in demand there include app devs, help desk analysts, system admins and business analysts/project managers with ERP skills.

Finally, Singapore will continue to be strong, especially in second and third quarters, with business-facing roles again in demand, although Michael Page manager Michael Nette warned me that ex-pats will only be offered local packages.

“For most multinational and local companies there is a strong drive to recruit Singaporean citizens and then look for talented a foreign candidate if local talent cannot be found,” he added. “The Singaporean government has introduced stricter criteria for government issued Employment Passes and Personal Employment Passes.”

The bad news for ex-pat IT pros is that local talent is strong and getting better all the time, so anything under senior managerial level roles will probably be filled by home-grown professionals. What’s more, in China you WILL be expected to speak Mandarin, or at least to have lived and worked in the country for a time previously. Language skills in international business hubs of Singapore and HK are less important (although would still give you an edge), but job seekers will be expected to do their search from over there, so it’s going to take a leap of faith.

“Be stationed in Hong Kong for a extended period. Visiting for only a week or applying for jobs from abroad make it very difficult to secure a role in Hong Kong,” said Michael Page regional director Christopher Aukland. “A lot of expats find roles through networks rather than applying directly – therefore being here in person to network extensively is critical.”

The days of the cushy ex-pat package are pretty much gone, so expect local wage scales and lots of competition, unless you’re lucky enough to get a transfer out here with your current employer. That said the experience gained – both life and work-wise – will be invaluable for future career prospects, so it’s well worth a punt if the time is right for you.

You might even end up never leaving.

 


Why Lenovo can’t launch its phones in the US yet

lenovoLenovo is the number one PC maker in the world and rapidly gaining popularity in the smartphone space, where it’s second in China, yet it’s been forced to delay its planned entry into the US mobile space by up to 3 years.

Reports from CES last week had Lenovo execs lowering expectations in front of the media rather than the usual ambitious predictions and bravado that characterise the world’s biggest consumer electronics show.

As I reported on The Reg, CEO Yang Yuanqing predicted last May that the firm would launch a phone Stateside within a year.

However, at CES Lenovo’s Americas president Gerry Smith told journalists it could be another 2-3 years, and that the firm was waiting for the “right time”, the “right product” and looking to boost marketing/branding spend first.

It’s certainly a given the firm will eventually take on Apple in its own back yard, but with PC sales tanking globally, why such a long lead time?

I spoke to some local analysts to find out.

IDC’s Melissa Chau argued that it comes down to brand recognition and industry partnerships.

“The biggest challenge any smartphone player has in breaking into the US has to do with partnerships. Even Nokia found it a problem building the right relationships with carriers and I wouldn’t be surprised if Lenovo is finding the same,” she told me.

Lenovo needs also to find a unique selling point – something to differentiate it from the likes of Huawei, ZTE and others which have already shown they can produce decent handsets for US punters at low cost.

Canalys analyst Jessica Kwee was more optimistic, arguing that Lenovo already has good brand recognition thanks to its Thinkpad laptop line.

“Lenovo is one of the most well-known Chinese brand with a good brand image even in the US, which may help it do better than some of its Chinese peers when it does launch its smartphones there, although there are plenty of other reasons that will help determine its success, such as the products, channels, marketing and timing,” she told me.

In the end there’s nothing wrong with a company like Lenovo taking its time before launching into an important market.

But I have a feeling that it will make a move sooner rather than later. Giving your rivals – especially Chinese ones like Huawei – a 2-3 year head start is never wise, let alone in a fast-moving and highly competitive space like the US smartphone market.


China 2014: The Empire Strikes Back

chinese flagIt’s the most wonderful time of the year. At least, if you’re an IT commentator or a vendor with “end of year round-up/next year predictions” stories to sell in to the media.

As a hack whose inbox has been deluged with this kind of dross for weeks now, I’m going to look ahead to 2014 with a more focused question, namely: “how will Western companies fare in China next year, and vice versa?”

Well, first up the signs aren’t looking good for US tech firms. Washington has turned up the anti-China rhetoric fiercely in 2013 and with high profile reports like Mandiant’s finally tying Beijing to cyber espionage, things were already looking tricky for US firms in China.

Then Edward Snowden happened – a gift from heaven for the Chinese government which can now portray itself as victim of spying, not a perp, with an even straighter face.

Expect the backlash to come from Beijing, partly because of this, but also because China has some world class companies of its own now, especially when it comes to networking equipment (Huawei and ZTE), PCs (Lenovo) and mobile devices (all of the above plus Xiaomi, Oppo, Meizu, Coolpad, etc etc), so it can afford to be more self-reliant.

IBM and HP have both announced they’re shedding jobs in the PRC, despite the strategic importance of the market.

IBM just announced a new cloud partnership which will see it team up with Azure partner 21 Vianet to provide managed private cloud capabilities to business customers there, however it admitted in October a 22 per cent sales slump in China. Ouch.

Cisco has seen a recent 6 per cent sales slump in China with John Chambers admitting on a November earnings call: “China continued to decline as we and our peers worked through the challenging political dynamic in that country.”

Then there’s Qualcomm, which counts China as a $1bn market, has worked with countless local OEMs to support their products and yet now finds itself at the centre of an anti-monopoly investigation which could see it fined in excess of $1bn.

The rule in Beijing seems to be; if you can’t beat ‘em (and China still has some way to go before its chip makers are world class), fine ‘em.

Expect more of the same next year.

So what of the great Chinese invasion? I spoke recently to Deloitte TMT partner William Chou about this.

In the hardware space historically only the likes of ZTE, Lenovo and Huawei had a chance to grow their offerings abroad, but with VC firms now splashing the cash, more innovative local firms will be able to invest in R&D and expand their footprint internationally, he argued.

Coolpad, Meizu and Xiaomi, to name but three, could be names to watch for 2014.

“There are a lot of these smartphone manufacturers but the ones which will be winners are  not really the handset manufacturers but the ones which can combine hardware, software and internet services, like Xiaomi,” Chou told me.

Others he mentioned included a Shenzhen-based handset firm looking at JVs in France and South Africa and an unnamed private company “aggressively” looking to expand in the European market.

On the internet side there are fewer potential breakaway global brands which could make a real impact in 2014.

Tencent’s WeChat is definitely one of them, although Chou argued that Google-beater Baidu will struggle as it seeks to “re-engineer its business model from search to mobile internet”.

There are also a host of little-known software and online firms under-the-radar ready to pounce, including one of the China’s online travel giants which is looking to acquire in Germany, Chou revealed.

In fact, the recently announced Deloitte Fast 500 list of fastest growing APAC start-ups had more companies from the Middle Kingdom than any other represented, although none made the top ten.

Going into 2014 entrepreneurs who are able to “apply technology to other industries” will stand the best chance of success, Chou said.

“China has an ageing population and a one-child policy so healthcare is a serious problem, so how you apply e-health will be a trend,” he explained. “Another major challenge is pollution, so clean tech will be a major area for entrepreneurs to consider as well.”

Whatever happens, things are never quiet in this part of the world. Let’s see what you’ve got 2014.


Google aborts $300m datacentre plan, but will it be back?

datacentreThe big news from the Orient this week, or at least this small part of it, has been Google’s decision to pull out of plans to build a $300 million datacentre in Hong Kong.

Now the web giant claimed this was due to high costs and the difficulty of getting enough land for its requirements, which at first glance seems fair enough. It ain’t cheap here and land is at a premium in the tiny SAR.

However, the more I think about it the stranger it seems, and here’s why.

  • It’s not short of a bob or two – was cost really the reason for its decision?
  • The project has been trailed way back since 2011 when Google announced it bought 2.7 hectares of land in the Tseung Kwan O Industrial Estate near Sai Kung, although interestingly a link to the Google page on it now results in a 404 error message.
  • At the time, Google said: “We chose Hong Kong following a thorough and rigorous site selection process, taking many technical and other considerations into account, including location, infrastructure, workforce, reasonable business regulations and cost.”

So what’s changed?

Mainland China is admittedly a small market for Google and that probably won’t alter unless there’s an unimaginable change of heart from Beijing. But it knew that back in 2011 when it bought those 2.7 hectares of land that are suddenly deemed not enough.

It’s more likely that with projects underway in Singapore and Taiwan, Google is concentrating on those first to ramp up its datacentre presence in the region.

We must remember it’s still a baby in the IaaS space when compared with the AWS behemoth.

But I personally wouldn’t rule out a return to the HK project for Google in the future as it looks to grow its Google Compute Engine offering in the future. Rival Rackspace has been steadily building out its operations from Hong Kong, for example, recently launching its first public cloud service in Asia from the former colony.

It must be added that Google already has a healthy complement of servers in the SAR and recently announced a tie-up with the local Chinese University of Hong Kong, so rumours of dissatisfaction with and interference by the local government may be wide of the mark.

However, news of the pull-out will still be a big blow to the Government CIO’s Office as it tries to sell HK over its near neighbours as Asia’s premier datacentre destination.

Recent efforts have included promoting the use of converted factories by waiving various fees and even looking into the possibility of underground facilities built in caves.

If any more PR blows like the Google story start landing next year, it might be time for the HK government to rethink its strategy.


OpenStack: the open source cloud project taking Asia by storm

openstack summit logoCan you guess which city has more OpenStack contributors in it than any other on the planet?  Well, it’s Beijing.

That may come as something of a surprise given the heritage of the open source cloud computing project – NASA and US hosting/cloud giant Rackspace.

However, it’s certainly not a one-off, with several other cities in the PRC also boasting significant numbers of acolytes, including Shanghai which also ranks in the global top ten.

I learnt this and rather a lot more about the project at the OpenStack Summit in Hong Kong this week. It was a conference heavy in symbolism for the OpenStack Foundation – its first ever outside the US and the first since the release of Havana – its eighth major release for building public, private and hybrid clouds.

Having slogged my way around IT conferences for more years than is healthy for a person of my age, the summit was a first for me in many ways.

First up the new announcements from vendors were kept very much in the background – barely mentioned at all in the keynotes and not publicised heavily elsewhere at the event.

Now that could be the fault of the event PR team but I’d like to think it’s because the Foundation are trying to send a message of inclusivity to the community – that no one vendor should be allowed to use the platform to market its wares so blatantly to a captive audience of over 3,000 enthusiasts.

That’s not to say there was no news, of course, or that the major vendors weren’t using the show to meet customers, get their message out, etc, but it was certainly toned down from the all-guns-blazing razzmatazz of some  industry events I’ve been to.

Part of that no doubt lies in the fact OpenStack Summit is really about bringing the community together to share ideas and best practices on implementations and, quite literally, to sit down and draw up a roadmap for where it is headed next.

It is still very early days for OpenStack versus, say, Amazon Web Services, and there is a certain amount of tension still in the community about whether it should be seeking to emulate the cloud leader or take a separate path of innovation – “letting a thousand flowers bloom”, according to Canonical founder Mark Shuttleworth.

The Rackspace private cloud VP Jim Curry and CTO John Engates I chatted to admitted feature parity isn’t at the same level as AWS yet, but also claimed that itself is a bit of a red herring as few people use all the features in Amazon anyway.

In the end one of the more eloquent and passionate speeches on the open source project came from Red Hat consulting engineer Mark McLoughlin – one of the top OpenStack contributors in the world if rumours are to be believed

“Does anyone think we’re just going to add a handful of new projects in 2014 and then stop? I really don’t think that’s realistic,” he said. “I think it’s going to continue to expand and become a broad umbrella of projects. We need to embrace the collaboration that’s happening under this OpenStack umbrella.”


Google: ‘Start-ups can save the world’

eric schmidt“Entrepreneurship is the solution to all the world’s problems,” according to Google executive chairman Eric Schmidt, who was in Hong Kong today to launch a new program to foster greater start-up talent within the Chinese SAR.

Schmidt’s visit was something of an anti-climax in the end. Media were not invited to ask any questions and what we finally got from the Google man after a half hour delay was less than insightful.

He trotted out the usual argument that more innovation and technical invention will likely gravitate to this part of the world because there is a “numerical advantage” in terms of graduates with degrees in STEM subjects.

Several times he also repeated the notion that “the native underlying Chinese culture is entrepreneurial”.

“We all know this, it’s been true for 1000 years. It’s a great asset of Chinese history,” he said.

The inference here is that the region and its people should be more inclined than most to producing innovative technology start-ups.

However, we heard very little about why that’s simply not happened thus far, in Hong Kong at least, although Schmidt did acknowledge that there wasn’t enough of a VC industry here and that, although entrepreneurial, the locals are also culturally afraid of being “different”.

Google’s announcement today – a program of mentorship and incubation with the Chinese University of Hong Kong – is surely yet another indication that the SAR government has singularly failed to foster the kind of innovation that can start local and grow internationally.

It’s a view I’ve heard time and again – even from successful international technology companies who came to Hong Kong with an impression of a hi-tech city and found instead something much less mature to work with.

The conversations at most local tech conferences I’ve been to are still at a “what is the cloud?” stage. It’s difficult to believe sometimes.

When asked whether Google was thinking of founding a formal incubator project even Schmidt had to admit: “You don’t have a big enough software industry. Your lack of software … will hurt you in terms of your global ambitions.”

The one year project announced today is unlikely to change that much.

We don’t know exactly how much access to Silicon Valley “mentors” and help with start-up costs local entrepreneurs will get as part of the initiative, but at first glance it seems like a pretty good way for Google to cream off some of the best of that limited Hong Kong talent.


Decrypt Weibo: new tool promises a censorship-free Sina Weibo

great fireGreatFire.org, a not-for-profit calling for an end to China’s repressive censorship regime, has launched another tool designed to bring transparency to the Chinternet and no doubt some consternation in Beijing.

I covered the Decrypt Weibo announcement over at The Register. It pretty much does what it says on the tin, allowing users who see a post on Sina Weibo that has been blocked by the censors, to retrieve that message.

The founders of GreatFire have been mapping the censored Chinese internet for over two years now and last year launched FreeWeibo, a tool which allows users to conduct uncensored searches of Sina Weibo – by far China’s biggest weibo platform.

However their work so far seems to have flown under the radar, which probably comes down simply to user numbers.

“We’ve been operating FreeWeibo.com now for almost a year and they have not done anything to try to block that service,” co-founder Charlie Smith told me. “It may be that we are just a small blip on their radar. But we think that we are making things difficult for them and we are going to continue to makes things difficult.”

The big worry for internet freedom advocates is that China’s latest attempts to suppress online free speech have edged the closest yet to an Orwellian “thought police” model.

In attaching severe jail terms to any popular online message subsequently deemed to be a harmful “rumour”, the government will slowly and insidiously create a nation where all but the bravest are afraid to say anything mildly controversial online, for fear of reprisals.

That’s the worry anyway, as GreatFire alludes to in its post explaining the launch of Decrypt Weibo, although it’s good to hear that Smith and his team are undimmed in their fight.

“Sina’s likely reaction to our new service will be to inform the authorities about our presence … and put the matter in the hands of the police. The police won’t find us and won’t be able to shut us down which means that they would have to shut down the entire Sina Weibo service to stop us doing what we are doing. This would lead to a massive public outcry,” he said.

“Of course, we hope that they just decide to end online censorship voluntarily.”

In the end, the only way this could happen is if the Communist Party realised that its demand for indigenous innovation-based economic growth (rather than one reliant on copying and stealing IP) is doomed if it continues to suppress debate online and place such a heavy burden on web companies for self-policing their platforms.

Unfortunately I don’t think this will happen anytime soon, so in the meantime let’s hope Decrypt Weibo finds its way into the hands of as many Chinese netizens that need it as possible.


China ready to lift the Great Firewall. Maybe. In part of Shanghai

chinese flagReports emerged from China today that at first sight seem almost unbelievable: the Communist Party about to lift the Great Firewall and unblock access to Facebook, Twitter and a host of other banned sites.

Then the small print. If the anonymous government sources are speaking the truth, it will be only be relevant to Shanghai Free Trade Zone, a 28 sq km pilot project designed to encourage greater foreign investment in China and open its economy up to the international markets.

“In order to welcome foreign companies to invest and to let foreigners live and work happily in the free-trade zone, we must think about how we can make them feel like at home,” one government source told the South China Morning Post.

“If they can’t get onto Facebook or read The New York Times, they may naturally wonder how special the free-trade zone is compared with the rest of China.”

Now while that seems fair enough, the Communist Party isn’t known for its love of unfettered access to the internet – after all the free flow of information online is precisely the sort of thing which it knows will lead to its demise.

So what’s this all about? Well, a few things sprung to mind:

  • China is in the middle of one of the worst crack downs on online freedom anyone can remember, so don’t expect this localised liberalisation to spread anywhere else in the Middle Kingdom. The party is very much still for the suppression of any discussion it deems “harmful”.
  • Even if the Great Firewall is lifted in the Shanghai zone, doing so from a technical standpoint will take time, according to Forrester analyst Bryan Wang.

“The network within the free trade zone will exist something like an intranet, which is connected to the international backbone without going through the Great Wall firewall,” he told me. “Current infrastructure will not be enough to support the future development. China Telecom or Unicom will need to lay out new fibre in the free trade zone.”

  • The Party giveth and it taketh away. Nothing is confirmed yet, and until state-run media reprint the story, we can probably take it as just a rumour, possibly one designed to increase international publicity for the zone, which is a pet project of new premier Li Keqiang.

    The whole free trade zone itself is only a pilot, so we can expect Beijing to bring the Great Firewall crashing back down on the region if its censorship-free internet policy backfires.

On a side note, how will Hong Kong react to the free trade zone?

If the Shanghai pilot is successful, more of them could spring up across China, effectively stealing its thunder as the only truly outward facing, economically liberalised, online censorship-free region in the Middle Kingdom.

Although a free and unfettered internet may soon no longer be a differentiator for Honkers, however, it’s likely that its superior IP protection regime, rule of law and business friendly visa system will still tip the balance in its favour for most MNCs.


Microsoft’s Windows Phone challenge: selling Nokia-less Lumias in India

lumia 520A couple of weeks ago I wrote how Asia would be the key to Microsoft’s success with its soon to be acquired handset business and Windows Phone. Well, new IDC stats out this week confirmed the importance to Redmond of one of Asia’s biggest markets, India, but also that it may struggle without the Nokia brand.

India is now rated by many analysts as the fastest growing smartphone market in the world.

The numbers speak for themselves. The largest democracy on the planet has a population of over 1.3 billion but smartphone penetration of only around 10 per cent – in this it’s some way even behind China and has huge growth potential.

The question is who’s going to capitalise? Well, at the moment it’s the same old story of cheap, local Android handset providers. In India Karbonn and Micromax are two of the most prominent.

Windows Phone was a surprise second place in Q2, however, with a market share of 5.3 per cent, according to IDC. Granted, this is way behind Android’s 90+ per cent, but still above iOS and BlackBerry and remember that percentages translate into 500,000+ units.

The key to success going forward, however, will be how it handles the Lumia, according to IDC analyst Kiranjeet Kaur.

She told me that although Nokia sells  the Lumia 520, 620, 625, 720, 820, 920 and 925 in India it has been the 520’s low price point of around Rs 10,000 (£100) which has made it popular.

Microsoft can’t rely on the Lumia range to continue attracting buyers in the future though, because the all important Nokia brand will soon be removed.

“People buy the Lumia because they’ve had an association with Nokia for many years and see it as a good brand,” she said. “But if the [acquisition] deal goes through in the next few months I’m not sure how quickly Microsoft can do the rebranding.”

Time will tell whether this makes a big difference. It has to be said that Nokia was far from coasting in India. Despite winning the country’s Brand Trust Report for the third year in a row in February, it has been mired by tax problems and slowing sales.

Still, India remains Nokia’s second largest market after China, according to IDC, so the next 12 months will be a key test of whether Microsoft can continue the momentum and take on the likes of HTC and Samsung in the mid-range as well as stealing a bit of share from domestic players at the lower end.

It will be an uphill task.