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What are Lenovo’s Plans for Motorola?

Ever since Lenovo bought Motorola, we’ve been wondering what Lenovo has planned for the future of the Motorola brand. As we’ve seen, acquisitions of big names don’t always mean those big names will be kept around—after a honeymoon period, Microsoft has phased out the Nokia name from their Lumia line of devices, all but killing off the Nokia name in the high-end smartphone market.

It sounds like for the time being, the Motorola name won’t meet the same fate. At MWC, we asked Anjana Srinivasan, global tablet marketing lead for Lenovo, about the company’s plans for the two brand names. Srinivasan told us that the two brands “are extremely complementary,” and that Lenovo plans to keep both around, using the brands’ respective strengths to make inroads on the huge leads that Samsung and Apple have.

In practice, that strategy is most likely centered around the United States. Lenovo isn’t well-known in the United States as a smartphone maker, despite the fact that the Vibe line has been going strong internationally for a few years. However, the Vibe line of smartphones has never been sold in the United States, and most likely won’t be—the smartphone market is the most top-heavy in the United States, where Apple and Samsung together control well over half the market. Trying to compete as an upstart doesn’t seem promising, but getting hold of a brand that is already well-known is a different story. Lenovo will be using Motorola, and especially the Moto line of Android phones, as a way to make inroads in the United States market without having to take the risk of shipping the Vibe devices stateside.

Srinivasan also talked about the spate of sub-$200 budget devices coming from not just Lenovo, but the entire industry at MWC. Despite headliners like the Samsung Galaxy S6 and the HTC One M9, the show was defined by these budget phones, most of which are budget because they’re stocked with technology that was in high-end phones a few years ago. According to Srinivasan, these new devices “have been now optimized for ways the consumers now use their devices,” citing the maturation of the mobile market and a more in-depth knowledge of how customers actually use phones. That allows companies like Lenovo to scale back on less important specs while improving other features, like the display or the camera, depending on if the device is a smartphone or tablet.

But, the maturation of the smartphone market is important in one other major way. Sales of high-end smartphones are reaching a plateau (except in China and other emerging markets, where they’re just starting to take off), with buyers increasingly being those simply buying a newer version of a smartphone they already owned. It’s still a very lucrative market, but it’s not necessarily the most promising market for growth.

Budget devices are another story. These are the devices aimed at first-time buyers, and it’s easy to forget sometimes, but that’s still most people on this planet. Figuring out how to get phones cheaper and into the hands of those billions of people are where most of the money to be made is—even if the margins are smaller, the volume of potential customers alone makes the effort worth it. That’s why you’ll be seeing a lot more high-profile budget phones in the coming year, and probably beyond. It’s a race that’s still to be won, while the high-end smartphone market has already settled down, with relatively few companies being anywhere near competitive.

This is also a way that companies can differentiate their high-end smartphones. You probably noticed all the gold and rose gold colored devices lately, along with the jewelry-like colors available for the now glass-and-metal Galaxy S6. That’s no accident—it’s a concerted effort to create the perception of high-end smartphones as exclusive, luxury products. By making these devices more expensive and more expensive-seeming, companies like Apple and Samsung are taking a play right out of the old fashion textbook, using exclusion as a means to make their high-end devices more desirable.

Lenovo’s strategy seems to be in line with where the market is headed, although it’ll be interesting to see if they take the Moto X in a more premium, high-priced direction, using the (possibly phased out) Moto G or the budget Moto E as their budget, affordable stock Android device. We’ll likely find out later this year, but we can already say for sure that the new Moto E has proven itself to be quite the spectacle for a budget phone.