Lenovo, It's Time to Grow UpBy John G. Spooner | Posted 2006-04-24 Email Print
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On its first birthday, the PC company's immediate challenge is getting its brand known.On its first birthday, the PC company's immediate challenge is getting its brand known.
It'll be business as usual at Lenovo Group's headquarters on May 2. However, the day will hold special significance, marking the first anniversary of its acquisition of IBM's Personal Computing Division.
Since the closing of the $1.25 billion deal on May 2, 2005, the "new Lenovo," as the company often calls itself, has plotted a course that it hopes will broaden its customer base and ultimately hoist it upward in the ranks of the world's top PC makers.
Granted, Lenovo's and IBM's businesses, which essentially focused on China and the rest of the world, respectively, were more complementary than those of HP and Compaq.
But Lenovo management is credited by analysts and customers as having kept up its product quality and service standards and for having maintained the bulk of its large customers. Some customers say it has also become more aggressive on pricing, particularly in large bids.
"There was a certain amount of trepidation" about the deal, said Robert Rosen, president of the IBM user group Share, of Chicago. But, "The bottom line, from everything I've seen ... nobody notices a difference, which is good news."
But even though it saw solid growth in the first quarterit shipped 3.4 million units, up 10.5 percent, versus market leader Dell's growth rate of 10.2 percent, according to Gartneranalysts expect more from Lenovo.
"The step to demonstrate, now, is to start growing market share," said Richard Shim, an analyst at IDC, in San Mateo, Calif.
Lenovo faces both perceptual and legal challenges. It must continue to establish its brand name as well as counter challenges such as that from the State Department, which has moved to quash an agreement reached by CDW to sell the agency $13 million worth of ThinkPads due to security concerns.
Ray Gorman, a Lenovo spokesperson in Purchase, N.Y., said the company believes that CDW has already gone over the implications of its deal with the State Department. Before that, its acquisition of IBM's PC arm passed muster with the Committee on Foreign Investments in the United States, which reviewed the deal in March 2005.
Lenovo's more practical concerns revolve around its efforts to gain market share. It shipped 3.4 million units in the first quarter of 2006, versus Dell's 9.6 million and HP's 8.7 million, according to IDC.
Lenovo's strategy, in part, centers on its Lenovo 3000 brand, an all-new line of computers that rolled out in February to target SMBs (small and midsize businesses).
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Over time, Lenovo aims to sell to three sets of customers worldwide, as it does now in China. It plans to target larger businessesa traditional IBM ThinkPad strongholdas well as SMBs and consumers, according to Mark Cohen, executive director of Lenovo's Notebook Business Unit, in Raleigh, N.C. To that end, the company plans to add some products to the Lenovo 3000 line as well as to develop a consumer product line.
"We're starting to work on bringing [the consumer line] into selected markets, first in Asia and then looking at where it's applicable outside of that ... in order to further extend our reach and capture opportunities that are out there," Cohen said.
Indeed, "the biggest challenges it's going to face, going forward, are going to be go-to-market," said Leslie Fiering, an analyst at Gartner, in Stamford, Conn. Lenovo "needs to get the Lenovo brand into the channel. This is not an area where it has had to play seriously before. There's a learning curve there," Fiering said.
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