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China’s personal computer manufacturer Lenovo Group Ltd. overtook U.S.-based Hewlett-Packard Corp., or HP, in the third quarter to become the largest seller of personal computers (PCs) in the world measured by shipments, said the IT research company Gartner Inc. in October.
According to the internationally recognized research firm, Lenovo accounted for 15.7 percent of all PC shipments in the third quarter, while HP held 15.5 percent. Another U.S.-based PC maker, Dell Corp., controlled about 10.5 percent of the market during the period.
Yang Yuanqing, Lenovo Chairman and CEO, said Lenovo would not become complacent.
“Although competition has been fierce in the PC market, I firmly believe there is still room for continuous profit growth,”Yang said at a press conference on Lenovo’s quarterly financial results held in Beijing on November 8. “Becoming a leading enter- prise in the PC market is just a milestone in Lenovo’s development, as it is also looking to become a leader in other markets.”
Lenovo’s success is attributed to its long-term focus on emerging markets and successful overseas M&As. Facing a low profit margin in the PC business and fierce competition from tablet PCs and smart phones, the company is embarking on plans to diversify its businesses.
Reasons for success
HP stood atop the rankings as the world’s biggest PC maker for the past six years, but its market share loss came amid upheavals in its management and changes in its business plans. At one point, the company had considered spinning off its PC unit, a proposal that was later abandoned by Meg Whitman, HP CEO.
The company has also been hit hard by the world’s economic malaise and a shift among customers away from older types of computers toward mobile tablet devices.
Despite a gloomy outlook for PCs, Lenovo’s net profit from April to September totaled $303 million, up 20 percent year on year. During the same period, its sales revenue amounted to $16.68 billion, up 22 percent, according to Lenovo’s quarterly financial statement. PC sales of the company surged 17 percent while those of the whole world shrank by 5 percent.
Lenovo defied the odds because of some of its acquisitions and relatively high exposure to emerging markets, which are outperforming developed markets in sales, Brent Bracelin, an analyst at Pacific Crest Securities Inc., told China Daily.
In the past, Lenovo learned from HP, IBM and other Western IT companies, Wang Jiping, a senior analyst from the U.S.-based research firm International Data Corp., told China Daily. Lenovo started to develop its own sales and operations model in 2004 and then acquired IBM’s PC division in 2005. Now its business model and strategy have spread to global markets.
Wang said Lenovo in 2009 became the first PC company to classify countries into two categories: emerging markets, such as China, India and Brazil, and mature markets, such as the United States and Japan. Lenovo then developed a different strategy for each. Such a strategy has now been widely adopted among multinational IT companies.
The main reason the company is the top PC seller is its strategy of penetrating into lower-tier cities in China and emerging markets, Wang said.
About six years ago, Lenovo started selling more of its products in China’s rural areas, a step that Wang believes will contribute to the company’s development in the next five years.
In China, Lenovo has a 34-percent share of the PC market, up 2.4 percentage points year on year, and shipments increased 8 percent year on year in the second quarter of 2012, according to a company statement.
In other emerging markets, Lenovo surpassed Dell and HP earlier this year to occupy the top spot in India and announced a few weeks ago that it would cooperate with a company in Brazil to expand its presence there.
Meanwhile, Lenovo has become the top PC shipper in India and is aggressively expanding in Latin American countries with factories in Brazil and Mexico.
While some Chinese IT industry players have tumbled in overseas M&As, Lenovo has witnessed enormous success from its overseas deals.
In 2005, Lenovo acquired IBM’s PC business for $1.25 billion, and it also shouldered$500 million of the latter’s debt. The takeover provided the company with American knowhow to expand globally. By making Lenovo the third largest PC producer worldwide, the acquisition gave Lenovo’s PC business a boost.
“We benefited in three ways from the IBM acquisition,” said Liu Chuanzhi, former board chairman of Lenovo, in an interview with China Central Television, the country’s national TV station. “We got the ThinkPad brand, IBM’s more advanced PC manufacturing technology and the company’s international resources, such as its global sales channels and operation teams. These three elements have shored up our sales revenue in the past several years.”
In August 2012, Lenovo signed an agreement with the U.S.-based data-management company EMC Corp. to develop and sell server and storage technologies. In September 2012, Lenovo delved into software development after buying the U.S.-based cloud-computing company Stoneware Inc. for an undisclosed amount. Stoneware has millions of users in the educational field and the U.S. public sector.
The same month, Lenovo agreed to buy the Brazilian consumer electronics maker CCE in a cash-and-shares-deal worth about 300 million Brazilian reals ($147 million). The purchase of CCE, Brazil’s largest domestic maker of electronics, will allow Lenovo to more than double its share of the PC market in the world’s sixth largest economy—from 3.7 percent to 8 percent—and diversify its product portfolio from single PCs to other electronic products such as tablet PCs and smart phones.
The deal will also add mobile phones and televisions to its product line in Brazil, where it recently announced plans to build a factory at a cost of $30 million.
Lenovo will continue to make acquisitions to boost its growth in global markets, said Lenovo’s Chairman Yang.
A larger ambition
Despite Lenovo’s market performance in the PC business, worries abound that the sector’s low profit margins will eventually become a burden for Lenovo with the increasing popularity of tablets and smart phones.
In the third quarter, 87.5 million PCs were shipped in the world, down 8.3 percent year on year, said Gartner.
Because of the current global economic slowdown and competition from mobile Internet products, PC shipments have been feeling the squeeze.
Some analysts say tablets will outsell PCs by 2016 or possibly earlier.
“Becoming the clear leader in global PC market of course remains one of Lenovo’s aspirations, but it only represents one more milestone in our journey as a company. We are setting our sights on delivering long-term profitable growth, while leading the way forward into the PC Plus era,” said Yang.
Lenovo launched a new strategy this year called “PC Plus” to focus more on other product lines such as mobile devices and build its cloud-computing offerings that allow users to access data remotely or control different devices via a single computer.
Yang said that Lenovo is looking to expand its tablet and smart phone businesses.
In the third quarter, the sales revenue from Lenovo’s Mobile Internet and Digital Home Department, such as tablet PCs and smart phones, totaled $718 million, accounting for 8 percent of the company’s total sales revenue between July and September. During the period, Lenovo smart phones held 13 percent of the market share in China, up 11.6 percent year on year and second to Samsung’s market share of 15 percent.
The company also plans to sell smart phones in Indonesia, the Philippines and Viet Nam in the near future.
Lenovo will place a greater emphasis next year on increasing profits “rather than grabbing more market share,” and aim to lift its pre-tax profit margin by at least 1 percentage point in three years, said Yang.
According to the internationally recognized research firm, Lenovo accounted for 15.7 percent of all PC shipments in the third quarter, while HP held 15.5 percent. Another U.S.-based PC maker, Dell Corp., controlled about 10.5 percent of the market during the period.
Yang Yuanqing, Lenovo Chairman and CEO, said Lenovo would not become complacent.
“Although competition has been fierce in the PC market, I firmly believe there is still room for continuous profit growth,”Yang said at a press conference on Lenovo’s quarterly financial results held in Beijing on November 8. “Becoming a leading enter- prise in the PC market is just a milestone in Lenovo’s development, as it is also looking to become a leader in other markets.”
Lenovo’s success is attributed to its long-term focus on emerging markets and successful overseas M&As. Facing a low profit margin in the PC business and fierce competition from tablet PCs and smart phones, the company is embarking on plans to diversify its businesses.
Reasons for success
HP stood atop the rankings as the world’s biggest PC maker for the past six years, but its market share loss came amid upheavals in its management and changes in its business plans. At one point, the company had considered spinning off its PC unit, a proposal that was later abandoned by Meg Whitman, HP CEO.
The company has also been hit hard by the world’s economic malaise and a shift among customers away from older types of computers toward mobile tablet devices.
Despite a gloomy outlook for PCs, Lenovo’s net profit from April to September totaled $303 million, up 20 percent year on year. During the same period, its sales revenue amounted to $16.68 billion, up 22 percent, according to Lenovo’s quarterly financial statement. PC sales of the company surged 17 percent while those of the whole world shrank by 5 percent.
Lenovo defied the odds because of some of its acquisitions and relatively high exposure to emerging markets, which are outperforming developed markets in sales, Brent Bracelin, an analyst at Pacific Crest Securities Inc., told China Daily.
In the past, Lenovo learned from HP, IBM and other Western IT companies, Wang Jiping, a senior analyst from the U.S.-based research firm International Data Corp., told China Daily. Lenovo started to develop its own sales and operations model in 2004 and then acquired IBM’s PC division in 2005. Now its business model and strategy have spread to global markets.
Wang said Lenovo in 2009 became the first PC company to classify countries into two categories: emerging markets, such as China, India and Brazil, and mature markets, such as the United States and Japan. Lenovo then developed a different strategy for each. Such a strategy has now been widely adopted among multinational IT companies.
The main reason the company is the top PC seller is its strategy of penetrating into lower-tier cities in China and emerging markets, Wang said.
About six years ago, Lenovo started selling more of its products in China’s rural areas, a step that Wang believes will contribute to the company’s development in the next five years.
In China, Lenovo has a 34-percent share of the PC market, up 2.4 percentage points year on year, and shipments increased 8 percent year on year in the second quarter of 2012, according to a company statement.
In other emerging markets, Lenovo surpassed Dell and HP earlier this year to occupy the top spot in India and announced a few weeks ago that it would cooperate with a company in Brazil to expand its presence there.
Meanwhile, Lenovo has become the top PC shipper in India and is aggressively expanding in Latin American countries with factories in Brazil and Mexico.
While some Chinese IT industry players have tumbled in overseas M&As, Lenovo has witnessed enormous success from its overseas deals.
In 2005, Lenovo acquired IBM’s PC business for $1.25 billion, and it also shouldered$500 million of the latter’s debt. The takeover provided the company with American knowhow to expand globally. By making Lenovo the third largest PC producer worldwide, the acquisition gave Lenovo’s PC business a boost.
“We benefited in three ways from the IBM acquisition,” said Liu Chuanzhi, former board chairman of Lenovo, in an interview with China Central Television, the country’s national TV station. “We got the ThinkPad brand, IBM’s more advanced PC manufacturing technology and the company’s international resources, such as its global sales channels and operation teams. These three elements have shored up our sales revenue in the past several years.”
In August 2012, Lenovo signed an agreement with the U.S.-based data-management company EMC Corp. to develop and sell server and storage technologies. In September 2012, Lenovo delved into software development after buying the U.S.-based cloud-computing company Stoneware Inc. for an undisclosed amount. Stoneware has millions of users in the educational field and the U.S. public sector.
The same month, Lenovo agreed to buy the Brazilian consumer electronics maker CCE in a cash-and-shares-deal worth about 300 million Brazilian reals ($147 million). The purchase of CCE, Brazil’s largest domestic maker of electronics, will allow Lenovo to more than double its share of the PC market in the world’s sixth largest economy—from 3.7 percent to 8 percent—and diversify its product portfolio from single PCs to other electronic products such as tablet PCs and smart phones.
The deal will also add mobile phones and televisions to its product line in Brazil, where it recently announced plans to build a factory at a cost of $30 million.
Lenovo will continue to make acquisitions to boost its growth in global markets, said Lenovo’s Chairman Yang.
A larger ambition
Despite Lenovo’s market performance in the PC business, worries abound that the sector’s low profit margins will eventually become a burden for Lenovo with the increasing popularity of tablets and smart phones.
In the third quarter, 87.5 million PCs were shipped in the world, down 8.3 percent year on year, said Gartner.
Because of the current global economic slowdown and competition from mobile Internet products, PC shipments have been feeling the squeeze.
Some analysts say tablets will outsell PCs by 2016 or possibly earlier.
“Becoming the clear leader in global PC market of course remains one of Lenovo’s aspirations, but it only represents one more milestone in our journey as a company. We are setting our sights on delivering long-term profitable growth, while leading the way forward into the PC Plus era,” said Yang.
Lenovo launched a new strategy this year called “PC Plus” to focus more on other product lines such as mobile devices and build its cloud-computing offerings that allow users to access data remotely or control different devices via a single computer.
Yang said that Lenovo is looking to expand its tablet and smart phone businesses.
In the third quarter, the sales revenue from Lenovo’s Mobile Internet and Digital Home Department, such as tablet PCs and smart phones, totaled $718 million, accounting for 8 percent of the company’s total sales revenue between July and September. During the period, Lenovo smart phones held 13 percent of the market share in China, up 11.6 percent year on year and second to Samsung’s market share of 15 percent.
The company also plans to sell smart phones in Indonesia, the Philippines and Viet Nam in the near future.
Lenovo will place a greater emphasis next year on increasing profits “rather than grabbing more market share,” and aim to lift its pre-tax profit margin by at least 1 percentage point in three years, said Yang.