Lenovo Restructures Business, Prepping to Lead PC+ Era

By Michelle Maisto  |  Print this article Print

Lenovo will soon divide its business into four groups—PCs, mobile, the cloud and enterprise—making clear its plans for attack.

Lenovo, preparing to be a leader in the "PC+ era," has announced a structural reorganization. Instead of two business groups, roughly divided between its Lenovo and Think brands, the new structure will establish four distinct groups, making clear where Lenovo intends to equally focus its intense energies.

A PC Business Group will oversee the Lenovo and Think brands, work to grow Lenovo's PC market share and be led by Gianfranco Lanci.

A Mobile Business Group will oversee smartphones and tablets, work to make Lenovo a global leader in both markets and focus on developing a smart TV business. It will be led by Liu Jun, who currently leads the Business group focused on consumer and mobile products.

An Enterprise Group will be led by Gerry Smith, who's currently responsible for Lenovo's Americas Group. Enterprise will include servers and storage and be given a goal to "aggressively build a new, fast-growing profit engine in enterprise," Lenovo said in a Jan. 28 statement. Lenovo last week announced plans to purchase IBM's x86 server unit for $2.3 billion, and if all goes well that acquisition will also be part of the Enterprise group.

Finally, an Ecosystem and Cloud Service Group will oversee Android and Windows opportunities and be led by Lenovo Senior Vice President and CTO George He. He's goal for the group will be to build Lenovo's ecosystem in China, where it's already the second-largest smartphone provider, and "drive a strategy for monetization and ecosystem expansion."

The new groups will be effective April 1.

Lenovo CEO Yang Yuanqing said in a statement that Lenovo is the No. 1 PC company in the world and the No. 3 company in the smart connected devices space, and that its IBM acquisition will make Lenovo a "significant competitor" in the enterprise space.

"Given this momentum, now is the perfect time to prepare for the next phase in our growth. To do this it is necessary to build new businesses and new pillars for our company," said Yang.

"The new structure will help us be even faster, more focused and more efficient in providing innovative products and services to an incredibly diverse global market with a range of technology needs," Yang continued. "We know we must anticipate the next set of opportunities for our company, and we are preparing our organization for the future. This way Lenovo can not only continue as the world PC leader, but become a true leader in the PC+ era."

Analyst Jack Narcotta, with Technology Business Research, says the new business groups will enable Lenovo to bring its "protect and attack" strategy to its mobile device segment, which during Lenovo's last earnings call Yang said he hoped would, in five years' time, account for 50 percent of total sales.

"We know how successful Lenovo has been with this strategy in the PC market—it has bucked the global trends and is actually growing its PC business—so just imagine how aggressive Lenovo aims to grow in the smartphone market, which, by the way, carries better gross margins than PCs," said Narcotta.

While Lenovo likely won't try to enter the U.S. smartphone market until later this year, there's little doubt that it's coming.

"Lenovo will have to work hard to convince U.S. carriers their Android devices are unique among a sea of other Androids," Narcotta added. "That's going to be a rare challenge for Lenovo—in China, it can rely on the strength of its brand to ship product … but in the U.S. Lenovo is primarily known only for ThinkPad PCs. The U.S. smartphone market will be an uphill battle, especially after the quarters Apple and Samsung just posted."

Lenovo last announced its quarterly results Nov. 7, 2013. It brought in revenue of $9.8 billion and net income of $220 million and announced that it had outperformed the market for the 18th consecutive quarter. While it shipped more PCs than its competitors (14 million), it sold even more tablets and smartphones (14.6 million combined).  

Introducing the Lenovo Yoga tablet line in Los Angeles October 2013, along with the company's newest product engineer, Ashton Kutcher, Chief Marketing Officer David Roman told the world via a livestream that Lenovo is "rapidly, radically transforming."

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Originally published on www.eweek.com.