This Veteran Phone Maker Could Take On Apple and Samsung

Article was originally posted here

Apple (NASDAQ: AAPL) and Samsung are synonymous with the smartphone market, but their foothold isn’t quite what it used to be. And a veteran competitor is releasing two new phones that could be game changers for the $355 billion industry…

Four of the five best-selling phones of all time are made by Apple or Samsung. This doesn’t change the fact that the companies together own only 37% of the market. We say “only” when, ordinarily, this would be a gigantic market share.

Considering how ubiquitous iPhone and Samsung have been in the United States and the UK, you might not believe an entire 60% of the market was left for the taking.

What’s really going to disrupt the market is something Apple and Samsung simply can’t tap into: affordability.

We’ve entered a period where both companies are relying all too much on customer loyalty to sell phones. IPhone revenue for Q4 2018 was 15% less than the year before. Sales fell by 20% in China for the same period, as the surging Chinese Huawei phones bumped up 23%.

Samsung’s mobile devices once made up the majority of their overall sales and profit. They dropped 33% from Q3 2017-18 and continued sinking into Q4.

According to Business Insider, one in three iPhone users have reported price as a factor in their hesitance to upgrade, indicating price is a barrier to access for a large chunk of the smartphone-buying population. Some consumers just aren’t willing to put down a grand for an additional meter of water resistance or 100 more pixels on their cameras.

To make up for declining phone sales, Apple has shifted its focus to healthcare and smart home technology. Those services earned an all-time high of $10 billion in Q4 2018 – a sizable change from the $7.9 billion earned at the same time last year. Samsung’s attention is also drawn elsewhere in 2019, planning to invest trillions in production facilities that will expand their chip production operations.

Don’t Miss: This Is a $12.3 TRILLION Opportunity

All of that said, a combination of price conscious consumers and ho-hum upgrades could give life to one of the other smartphone makers that make up 60% of the market. The affordable smartphone market would be safe in an economic slump – if not more profitable – when a company can offer something near the quality of their luxury, front-running counterparts.

See what this China-based company has been up to – and what it could mean for your money…

How Motorola Can Compete with Apple and Samsung

Motorola, a wholly-owned subsidiary of the China-based Lenovo Group Ltd. (OTCMKTS: LNVGY), just released its most impressive phone yet in February.

The Moto G7 is an affordable and comparable alternative to the Apple and Samsung phones, both costing upward of $1,000. With many of the same features and capabilities as its luxury competitors, the G7 goes for only $200 to $300, depending on which four versions you opt for. G7 is a line of four phones ranging from a stripped-down version called the Moto G7 Play to the premium Moto G7 Plus.

It’s expected give Lenovo a foothold in the “affordable smartphone” market and possibly even the mainstream market.

Saying the Moto G7 is “not far behind” the latest iPhone X and Samsung Galaxy S10 might even be stingy. You find almost identical specifications for the three benchmark phones when viewing them side by side: 64 GB storage, 12-16MP cameras, 8MP front cameras, digital zoom, face detection, quick-charging, all at relatively the same size and weight.

They all take the same sim card. They all have screen resolutions over 1,000 x 2,000 pixels, with nominal differences (unless you are truly a purist or super-fan), and image resolution is in the 4,000 x 3,000 range across the board.

The Moto G7 has a slightly bigger screen than both phones. It has a stronger battery (3,000mAh) and records clearer video than the iPhone.

The Galaxy’s 3,400 mAh battery is more powerful than the G7’s baseline, but the G7 Plus comes with a massive 5,000mAh battery

The Plus outshines the competition with its image resolution of 4,616 x 3,464 pixels and still costs only about $350.

It would only be fair to mention that the iPhone X and Galaxy S10 are both listed as “dustproof” while the Moto G7 is not.

What about the rest of the Android market? Savvy buyers might consider the Chinese Huawei this year for $2,600. But for quality and cost, you won’t find a better deal than the Moto G7. This will be a great opportunity for Motorola to start chipping into Apple and Samsung’s market share as cost-conscious consumers look for cheaper alternatives.

If that’s not enough, Motorola plans to bring back its historically popular Razr phone. Its steep $1,500 price tag may be justified, as it was once the best-selling phone of all time. The iconic Razr held a unique position as a fashion statement in the early 2000s, so if specifications don’t lead the conversation around its revival, nostalgia will.

The details on the Razr’s specs are still to be released, but the higher-end phone lends healthy diversification to the Motorola selection. It signals to competitors that Lenovo might be in for more than just the “affordable” market segment.

Plus, Motorola is just one of the pillars behind Lenovo…

Lenovo Is More Than the Sum of Its Parts

Lenovo acquired Motorola from Alphabet Inc. (NASDAQ: GOOGL) for $2.91 billion in 2014. It has since worked to turn the struggling brand around with an abbreviated name, a simplified portfolio, a reduction in operational costs, and a focus on distribution in Motorola’s core markets of North America, Latin America, and the UK.

Today, the phones go by simply “Moto,” and they target regions where a consumers’ smartphone options are more strictly defined by their service providers.

The Western connection between smartphones and their carriers initially posed a barrier to entry for the Chinese company, but the Motorola name and history give Lenovo a direct line to carriers in the United States.

Today, Lenovo is firing on all cylinders with its PCs and mobile devices. The earnings report for Q2 2018 shows Motorola breaking even worldwide for the first time. It also reports revenue for its Intelligent Devices Group (the group containing PCs and Motorola smartphones) at $11.84 billion, an increase of 10% from that same period the year before.

Motorola phones are expected to do well under the current leadership and business structure. Lenovo CEO Yang Yuanquing has talked about introducing a higher degree of choice and quality to the Western smartphone market, an initiative that is materializing with the new G7 and the Razr reboot.

Command of the affordable smartphone market and continued investment in a 5G future (the Moto z3 was the first-ever phone capable of being updated to 5G) will greatly bolster the Lenovo stock, but the real fruits of Lenovo’s Motorola acquisition are yet to be seen.

Lenovo is also thriving in the data market, with its Data Center group reporting a 58% increase year over year last September. The company is highly diversified – investments in PC, tablet, data centers, AI, and AR technologies – with an entire arm dedicated to smartphones in the United States.

Optimistic analysts project the share price will only jump about 13% this year, which isn’t the sort of projection that gets us excited. But with a price/earnings (P/E) ratio of just 15.7, Lenovo is undervalued compared to the overall market. The telecom sector averages a P/E ratio of 88, and the consumer electronics ratio is 33, so this company has plenty of room to run higher.

If the G7 turns into a hit, this stock could get a pop.

While 5G will be a game changer for the smartphone industry, its potential goes far beyond that.

In reality, this is going to be a $12 trillion market.

And this $6 company is set to dominate it.

Go here to find out more.

Follow Money Morning onFacebook, Twitter, and LinkedIn.

About Money Morning: Money Morning gives you access to a team of ten market experts with more than 250 years of combined investing experience – for free. Our experts – who have appeared on FOXBusiness, CNBC, NPR, and BloombergTV – deliver daily investing tips and stock picks, provide analysis with actions to take, and answer your biggest market questions. Our goal is to help our millions of e-newsletter subscribers and Moneymorning.com visitors become smarter, more confident investors.To get full access to all Money Morning content, click here.

Disclaimer: © 2019 Money Morning and Money Map Press. All Rights Reserved. Protected by copyright of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including the world wide web), of content from this webpage, in whole or in part, is strictly prohibited without the express written permission of Money Morning. 16 W. Madison St. Baltimore, MD, 21201.

This post is from MoneyMorning. We encourage our readers to continue reading the full article from the original source here.