Baidu (BIDU) and Lenovo Have a New Phone, Is it Time to Invest?

As we’ve discussed frequently over the past few weeks (see is Apple now America’s largest smartphone OS?), the smartphone industry is becoming more competitive by the year, and most analysts expect continued market share normalization to continue at least over the next half-decade. On Thursday, a rather interesting partnership was announced between Baidu.com, Inc. (NASDAQ:BIDU) and Lenovo Group Limited (PINK:LNVGY).

Originally reported by ZDNet, the two Chinese Internet and hardware giants are teaming up to “launch the LePhone A586, which is supported by [Baidu’s] cloud platform.” According to the report, the phone will be priced at 999 yuan – roughly $159 – and will use the QUALCOMM, Inc. (NASDAQ:QCOM) Snapdragon S4 MSM processor.

Interestingly, Google Inc (NASDAQ:GOOG)‘s Android operating system will be used for the LePhone rather than Baidu’s Yi OS, which had been featured on Dell Inc. (NASDAQ:DELL)‘s Streak Pro models. It is curious that the Chinese Internet giant chose to roll with Lenovo for its new phone, especially when its semi-new OS is being left in the cold, so to speak.

From an industry-level standpoint, the decision to go with Google and Lenovo do make sense, as each clearly has its advantages in the Chinese marketplace. According to Lenovo’s first quarter conference call, “smartphone [hardware] market share in China reached 13%” over the summer to take the lead above peers Nokia and Huawei, while Samsung is still in first place.

Google’s Android OS, meanwhile, has a whopping 90.1% stake in the Chinese smartphone OS market, according to a November report by research firm Analysys International, leaving mere peanuts for other players like Apple iOS, Nokia Symbian, and Baidu Yi. While we’re still waiting on more details the Baidu’s cloud-supported Android/Lenovo smartphone, ardent investors would be wise to consider an investment in the Internet company due to its mobile app potential and bargain bin valuation.

Regarding the former, Baidu is currently in the middle of an important transition from desktop to mobile, and company executives have stressed their company is on track to dominate the future. Last month, we discussed Baidu’s third quarter conference call, in which CEO Robin Li discussed this trio of important points: “Staying ahead of industry developments, creating a seamless mobile Internet experience and growing mobile users and usage,” adding that Baidu’s mobile cloud system had registered “over 100,000 developers.”