By Li Weitao (China Daily)
Updated: 2007-11-19 10:56

Lenovo is certainly a big name, even globally. The acquisition of IBM's PC unit in 2005 gave the Chinese firm worldwide exposure.

And it is faring quite well. Lenovo's better-than-expected performance has now even accelerated its efforts to break free from IBM's shadow. The firm says it will drop the IBM name completely before the 2008 Olympics, two years earlier than planned.

Yet fortunes are very different for Guangdong-based TCL Communications, which acquired Alcatel's mobile phone business. The Chinese mobile phone maker is now expected to start selling Alcatel-branded handsets in China this week - after they have not been seen on the shelves for two years.

That follows a recent agreement between Acatel-Lucent and TCL which extends TCL's right to use Alcatel brand by 10 years to until 2024.

It is a striking change from the strategy TCL adopted in 2005 to promote only the TCL brand at home while Alcatel products targeted overseas markets.

Revising the strategy is due to the sound performance of Alcatel-branded handsets in overseas markets, says Wang Guocong, executive vice-president in charge of the TCL-Alcatel handset business, according to Beijing-based China Electronics News.

TCL formed a joint venture with Alcatel's ailing mobile phone unit in 2004 and bought out Alcatel's shares the following year. TCL had hoped controlling the Alcatel brand could give it a leg up in its efforts to beat foreign powerhouses like Nokia and Motorola.

The high-profile deal was hailed as one of the first important steps by a Chinese company to expand overseas. The following year Lenovo acquired IBM's PC business. A number of Chinese companies including China Mobile have since taken the plunge and are tracking overseas acquisition targets.

Unlike Lenovo, which has jumped to the No.3 spot in the global PC market and is making a profit, TCL's domestic business has been hurting after it paired with Alcatel and its brand awareness remains weak overseas.

Wang claims TCL is recovering and Alcatel-branded mobile phones could stake out a new share of the domestic market.

But analysts say the prospects for both the TCL and Alcatel brands are gloomy and the chances of a turnaround are small.

"TCL's share of the domestic market is now negligible compared to its best times in 2003. And the Alcatel brand is the least relevant to most Chinese consumers," says Pang Jun, an analyst with data tracking firm GFK.

"That is making it quite difficult for both brands to make a mark."

In 2003, TCL and Ningbo Bird each had about 10 percent of the market and were even squeezing Motorola and Nokia.

Pang estimates TCL's share at around 0.6 percent now with Ningbo Bird at 2 to 3 percent. Perhaps even more humiliating is that Lenovo, a latecomer to the mobile phone market, managed to grab 6.7 percent of the market, the largest by a domestic player, in the second quarter of this year, according to Beijing-based research house Analysys International.

Both TCL and Ningbo Bird have been hit hard by quality problems, a lack of new models and lackluster features.

Insiders say the re-launch of the Alcatel brand in fact underlines poor confidence of TCL in its own brand in the domestic market.

But for Alcatel-branded mobile phones, the road ahead could be even tougher.

Hard call

Last year TCL sold more than 10 million Alcatel handsets overseas, double that of the previous year.

Earlier this month, it clinched a deal with the mobile phone division of Gome Electrical Appliances Holdings, the largest retailer of home appliances in China. Under the deal, Gome will procure 500,000 Alcatel phones, a TCL spokesperson tells China Business Weekly in a telephone interview.

TCL is also talking with another retailer, Suning Appliance Co Ltd, for a similar deal, the spokesperson says. Insiders say TCL is aiming to sell about two million Alcatel-branded phones next year in China.

TCL is to debut the first Alcatel handset, the "GlamPhone Elle N3" in Gome's shops. The fashionable slider phone, targeting female users, was co-developed by Alcatel and French fashion magazine Elle.

   1 2   

   1 2