Lenovo has smartphone mojo in China as it diversifies

Lenovo has smartphone mojo in China as it diversifies

Summary: In short order, Lenovo becomes the No. 2 smartphone maker in China and passes Nokia and Huawei.

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Lenovo appears to be about more than the ThinkPad as the company is now the No. 2 smartphone maker in China.

The Chinese PC giant---best known for its ThinkPad---reported strong first quarter results. Lenovo delivered first quarter earnings of $141 million on revenue of $8 billion. Lenovo also has $3.7 billion in cash and could go shopping.

Also: PC growth boosts Lenovo's Q1 showing

But the real takeaway from Lenovo's quarter was its smartphone momentum. On a conference call with analysts, CEO Yang Yuanqing said:

Our smartphone sales in China reached almost 5m this quarter. Total phone sales volume reached almost 7m to surpass our China PC volume for the first time. In June our smartphone market share in China reached 13%. Now we have surpassed Nokia and Huawei to become the number two smartphone and the all-phone player for the first time in China.

Given that performance, it's no wonder Lenovo execs snicker when asked about buying Nokia. Why bother?

If Lenovo can keep its smartphone momentum it can ride the Chinese smartphone market ---expected to grow at a compound annual growth rate of 20 percent per IDC---for years. Indeed, Lenovo's mobile internet digital home unit saw sales jump 173 percent from a year ago to $587 million. In the first quarter, the mobile unit represented 7 percent of revenue.

 

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That growth is critical given that Lenovo has perfected its protect and attack strategy. In a nutshell, Lenovo is protecting its core market share in the U.S. and China and chasing emerging markets hard. That emerging market growth is one reason that Lenovo still showing strong PC and laptop growth as the overall industry stagnates ahead of Windows 8.

What you're seeing with Lenovo is a company that's riding a core business---laptops and PCs---but working on key growth engines in mobile and the enterprise. On the enterprise front, Lenovo formed a joint venture with EMC. The payout? Macquarie analyst Jiong Shao estimates that the EMC-Lenovo venture will deliver $2 billion in revenue a year in three years.

Add it up and Lenovo aims to bundle storage with its server market share of 15 percent in China. Lenovo is the largest domestic server maker in China.

Lenovo's diversifications efforts are part of its goal to become a "leading PC Plus company."

In the meantime, Lenovo can ride PCs for a few years. Lenovo CFO Wong Wai Ming said:

Despite uncertainties in the global economic conditions impacting the PC market growth in the short term, we will remain focused to outperform the worldwide PC market in a profitable way. We have continuously achieved that over the last few years and remain confident to continue such trend. We execute our Protect and Attack strategy well.

Our core PC business is performing well and our strategic investment in Mobile Internet have started contributing to the Group growth in sales and improved profitability.

New products in ultrabook and the new Windows 8 operating system will help drive demand later this year. That will also benefit us. We will stay focused on balancing the cost initiatives and growth opportunities. We will continue to invest in core competence building, product innovation and promotion, especially to ensure successful launch of new products related to Win 8 and ultrabooks, and also new mobile Internet home products.

Topics: Smartphones, Lenovo, Mobility

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5 comments
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  • Does Lenovo sell smartphones under a different name?

    Strange, I never heard of a Lenovo smartphone. May be it is for China market only?
    RelaxWalk
    • Pretty much

      They do have some global units and an Intel based phone.
      The majority of their business has been China.
      rhonin
  • Overall Margins Are Under 2%

    I wonder if their PC business is dragging them down. Will they jettison it, like HP thought about doing?
    ldo17
  • Reliability?

    If the ThinkPads (X220i) are anything to go by the smartphones will be back to Lenovo for a replacement mainboard, cracked screen and/or dead hard drive more often than you receive phone calls.
    In a school of 1400 units I will never buy them again!
    drwain
  • Lenovo has smartphone mojo in China as it diversifies

    as more people are joining their middle class, the market support to their manufacturing base will expand and become self sufficient and create more (new product) market. lenovo will become big in smartphone business in china just like apple, since they have the same brand awareness as far as chinese consumers are concerned. so, we can expect in the near term, a chinese smartphone introduced here in the us and in the european markets.
    kc63092@...