Lenovo: The yin to Apple's yang?

Lenovo: The yin to Apple's yang?

Summary: While the Chinese PC giant may face its own unique challenges, it possesses an intangible asset that its competitors lack: Business sex appeal.

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My editor in chief, Larry Dignan, wrote an excellent analysis this morning about the challenges that Lenovo faces in an industry with ever-decreasing margins, a large set of hungry competitors, and also the difficulties in integrating its most recent $5.21 billion worth of acquisitions, namely IBM's System X server business and the Motorola Mobility smartphone/tablet business that was previously owned by Google.

Larry cites time to digest these companies as well as supply chain savvy as potential impediments to continued growth and increased marketshare. I'm just going to bellow a big buddha belly laugh and state that if these are Lenovo's biggest problems going forward, then they are good problems to have.

I also have to dismiss the supply chain statement outright, as Lenovo, for all practical purposes, is an extension of the Chinese industrial complex itself, and while it is not currently anything like Apple or Samsung in the smartphone or tablet business on an international scale, it manufactures a heck of a lot more PCs than either of those companies combined.

So, no snark intended, but I think it knows something about large-scale supply chains and dealing with manufacturing in China.

In May 2012, I made the following statement in my article Post-PC era means mass extinction for personal computer OEMs:

The biggest hurdle the PC OEM industry will have to face is the inevitable and painful consolidation. This is a process which began 20 years ago, when there were literally at least a dozen Tier 1 manufacturers as well as scores of Tier 2 and white-box vendors. Many of those companies no longer exist today, due to mergers, acquisitions, and companies simply going out of business.

The white box and system builder phenomenon is also in danger of disappearing entirely, much to my own remorse.

Lenovo is likely to usurp HP as top PC dog within the next two years, because it is not as fat a company, it's a virtual subsidiary of the Chinese government with huge domestic demand for its products, and has done well diversifying into Android and Windows tablets in addition to smartphones.

I think that statement stands as true now as it did then. Lenovo has home court advantage, and out of all of the PC companies, it is the most organized, with the clearest vision. It is also, in my opinion, the best prepared for industry consolidation and is the prime consolidation change agent itself.

And if you compare it to its industry peers, it has the most complete portfolio of products. Let's have a quick look at this.

Vendor Bus. laptops Bus. tablets Desk. Serv. Cons. tablets Cons. laptops

Phones

Lenovo
HP  
Dell  
Fujitsu        
Panasonic (X) (X)          
Amazon       (X)    
Microsoft (X) (X)   (X)  
Apple (X)  
Samsung      
Toshiba      
Sony * - - -   -
White Box OEM            
Asus
Acer  
Huawei          
ZTE          
LG          
HTC            
BlackBerry            
Note that (X) means "difficult to classify"

You'll see that I have marked specific categories for some of these vendors with an (X) because they don't precisely fit in the category.

Microsoft and Amazon aren't server vendors per se, because they have cloud IaaS and PaaS offerings.

Panasonic, while producing enterprise-grade tablets and laptops, doesn't fit the traditional mold because its ToughBook line has a distinctly vertical slant.

Microsoft's Surface Pro also defies easy categorization as either a business laptop or business tablet (it's kinda both), and the iPad, while frequently brought into business settings, isn't a business tablet per se.

Lenovo is now the only company in the entire industry that hits every single product category across business and consumer computing. Hewlett-Packard comes close to matching its portfolio, but currently lacks a smartphone business.

Lenovo has the very same "cool" or "sexy" factor as it applies to business hardware as Apple does for its consumer products.

HP and Amazon may very well end up having smartphone businesses sometime in the future, but that is simply conjecture at this point.

Dell can also be said to be hitting most of the categories, but has a much more focused product selection than HP, and now that it is gone private, is aspiring to become leaner.

Both Apple and Sony intersect on the consumer and enterprise side of Lenovo's business, but even when given the benefit of the doubt on this chart, I have difficulty calling Sony an enterprise player.

While both of these companies make "prosumer"-class laptops, much more MacBooks end up being used in enterprises than Vaios. But with Lenovo's help, this could change soon.

(Editor's note: 2/6/2014 SONY has sold its VAIO PC business to Japan Industrial Partners for an undisclosed sum. We've altered the chart to reflect this.)

Asus also shares many product categories with Lenovo, but many of its product offerings do not exist in the lucrative North American market. Its PadFone, for example, will only become available in the US later in 2014.

Asus' "business" laptops, like Sony's, are essentially spec'ed-up versions of its consumer offerings, and its servers effectively have no presence here, either. Much of the same could be said for Acer's products (such as its smartphones), as well.

HP is clearly Lenovo's main competition now. To me, HP's challenges are much more serious than the ones Larry Dignan brought to light for Lenovo earlier.

As of its last earnings report for Q4 2013, the company's overall revenue is down, of which a poorly performing software division is a contributing factor. We'll have a more accurate picture when the company reports Q1 2014 earnings at the end of the month, but I'm not expecting a miracle turnaround.

HP is a much larger company overall and has other divisions that Lenovo lacks, such as services, UNIX systems, enterprise storage, networking equipment, and printers.

So the overhead that HP has to deal with is considerable, not to mention that the company also has to manufacture its hardware in China and also compete in the same supply chain in which Lenovo has a home court advantage, along with a huge, built-in domestic market.

It shouldn't go without mention that in addition to the retail channel, historically, Lenovo has sold desktops/laptops to IBM's customers on large software and services deals, and now, presumably, it will do the same with its (formerly IBM's) x86 servers. And in addition to IBM, it also has a strategic partnership with EMC.

In other words: Lenovo gets the benefit of having access to the same portfolio of things that HP has, without the baggage of actually owning them.

So if HP is going to have a rough ride when facing competition from Lenovo, we can surmise that a number of other also-rans on this list are also going to hit some serious turbulence. As I said back in May 2012, consolidation is an inevitability, but as to how that plays out eventually is anyone's guess.

So that gives us a complete competitive landscape. But there's another aspect to Lenovo, which I think is an intangible asset the company possesses that is perceived but not necessarily recognized offhand: Lenovo has the very same "cool" or "sexy" factor as it applies to business hardware as Apple does for its consumer products.

In a very practical sense, Lenovo is "yin" (dark) to Apple's "yang" (light) if we are to use a Chinese Daoist philosophical analogy. Hey, it's Chinese New Year and I'm fresh out of horse jokes. Let's run with it.

Like Apple, Lenovo has an instantly recognizable industrial design, which in every sense projects "executive" and "well engineered" with many of its products, particularly the ThinkPad line, which it bought from IBM in 2004.

There will almost certainly be a great deal of crossover of that industrial design, once the Motorola acquisition is complete and there is unified branding. With crossover sales of those product categories to its target audience as well.

There are other companies on this chart that are certainly business oriented, but they lack Lenovo's unique, jet black, this means business, "I drive a Cadillac CTS and have a key to the executive washroom" Amex corporate card-carrying and airline clubbing je ne sais quoi.

OK, that was French, not Mandarin, but you get the picture.

Is Lenovo's ultimate strategy to becoming top dog in PCs, mobile and enterprise by being yin to Apple's yang? Talk back and let me know.

Topics: PCs, Laptops, Servers, Smartphones, Tablets

About

Jason Perlow, Sr. Technology Editor at ZDNet, is a technologist with over two decades of experience integrating large heterogeneous multi-vendor computing environments in Fortune 500 companies. Jason is currently a Partner Technology Strategist with Microsoft Corp. His expressed views do not necessarily represent those of his employer.

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23 comments
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  • Dell and Asus have made more phones than Lenovo

    Yet they don't get a tick for phones?
    The Asus Padfone range is one of the most innovative available.
    Nobody knows about it because the US carriers don't sell Asus phones.
    Dell was the first with the phablet Streak Mini 5 and still have phones, yet they get nix under phones?
    Dell easily has a better range for enterprise than Lenovo. They also have prosumer range (Alienware) that Lenovo can't match.
    warboat
    • Asus / Dell

      I fixed the copy as it relates to Asus, thanks. Forgot about the PadFone. Dell no longer makes Smartphones, they haven't since at least 2012.

      You may want to go over the IBM System X portfolio combined with Lenovo's current Server/Storage lineup before a final assessment of Lenovo's enterprise range.
      jperlow
    • Without Moto Mob

      Lenovo are the 5th largest smartphone worldwide. With Moto Mob, they will leapfrog Huwaei into 3rd place. Give that Asus aren't in the top 5, I would say that they haven't made more phones than Lenovo - they might have been at it longer and have released more models, but they don't currently sell anywhere near as many smartphones.
      wright_is
  • Re: The Yin and the Yang of Daoist philosophical analogies.

    I have to hand it to Jason for his insights on this topic, especially as it relates to Lenovo and the other companies mentioned. I think he nailed it.

    On a lighter "Yang" note, I did some online research regarding the origins behind the meanings of that Daoist symbol. I am always amazed at how a complex subject can be reduced to a simple chart and my research amused and delighted me once again.

    For example, on this web site: www.thetao.info/tao/yinyang.htm an interesting chart was created that gave a concise summary of Yin and Yang attributes and associations.

    Now I don't know if Jason chose to associate Apple with Yang and Lenovo with Yin because Apple products are mostly associated with "white" devices and Lenovo products with "black" ones or if his association was just by pure coincidence - I doubt that because Jason is a fairly bright lad - but looking at that websites chart almost begs a 1 to 1 comparison between Apple and Lenovo products.

    For example, the natural characteristics of "Yang" are: masculine, active, creates, hard and bright while the nature of "Yin" contains the attributes of: feminine, passive, receives, soft and black.

    Even on a lighter note, I think Jason even nailed his daoist analogy.
    kenosha77a
    • Re: Jason's included blog Yin and Yang graphic

      Per Jason's blog analogy, "Lenovo is "yin" (Dark) to Apple's "yang" (Light)", one can't help but wonder how that graphic shows the Apple symbol in the Yin section while Lenovo is depicted in the Yang half.

      Of course, since both the Yin and the Yang are never truly all "black" nor all "white" and that each contains the seeds of the other - per daoist philosophy - one can't quite call that graphic a "typo".
      kenosha77a
      • Probably

        the art department did the graphic and are "colorblind" on the whole Yin/Yang thing. ;-)
        wright_is
        • Correct

          I gave our editor the art idea, he executed. :)
          jperlow
  • This field is required

    Leonard Ovo, we salute you!
    robin@...
  • Panasonic does have phones

    http://www.gsmarena.com/panasonic-phones-6.php
    Jayadevan_m
    • Not exactly

      Panasonic left the Japanese smartphone market in September 2013. It has licensed the name "Panasonic" to OEMs in developing markets (such as India) but no longer produces them.
      jperlow
  • Curious

    What is the definition of a business tablet? That it can run a desktop operating system?

    Another definition might be that it is used in business...a lot.
    rfoto
  • Lenovo has the very same "cool" or "sexy" factor as

    cold pizza
    ForeverSPb
    • yup

      I too was wondering when Lenovo became sexy and cool. Writer's license I guess.
      ArcaneAce
    • You're kidding

      right? What a small sheltered world your mac fanboys live in. You obviously haven never touched and of the X1 Carbon notebooks let along the The Yoga line. Nevermind the fact that they get praise for having the best keyboards .

      This whole auto canned resposne/perception that only Macs are nicely built laptops is just complete bogus. Lenovo has surpassed them not to mention Samsungs latest high end offerings.

      but hey as long as there are gumdrop clouds and Cand canes lanes in your Apple world nothing else matters
      jonandkelly
  • Lenovo: The yin to Apple's yang?

    "...the challenges that Lenovo faces in an industry with ever decreasing margins..." Chinese businessmen don't care about one-shot business practices, they are more like slow but long-term. The decreasing margins will not deter them from slugging it out until everyone withdraw. They are known in asia as businessmen who will give a pinch of salt free if you buy fish from them, i.e. they want to keep you as a paying customer long-term by giving a freebie. So the reason why Chinese products are so cheap is not because they are cheaply made but because they want to capture the American and foreign markets long-term. As for expensive product, look at apple's products made in china, they are as good if not better than those made somewhere else.
    kc63092@...
    • Both China Mobile & Lenovo Taking a Page Out of Bill Gates Book of Genius!

      You are so Right!
      Remember or ever read about how Bill Gates's Microsoft was getting sued by Gary Kildall of CP/M fame? Well supposedly Gary and him, were friends at one time and Bill even referred IBM to him and his CP/M. But Gary's wife refused to sign non-disclosure agreements, while Gary was off flying his plane. That until Bill's mother (who worked as a main secretary in IBM) tried to get Gary in for an appointment to show IBM CP/M and he totally blew them off. So then she gave her son Gary's time slot appointment to meet with her bosses a second time to write an OS for IBM instead. He didn't have an OS, so he went out and bought QDOS from Seattle Computer Products, keeping it secret, what he was intending to do with it. Tim Patterson had used development manuals to write QDOS and copied CP/M API's almost exactly. Although no verbatim copied code could be found, it was generally accepted that QDOS was just one of the myriad of CP/M Clones coming out at the time!

      A prime example right now in China is Xiaomi. A company selling hardware only online with a customized Android version on extremely narrow margins to built a base of loyal consumers for future growth by word of mouth. They even offer their phones on chat programs and sell out of supply within minutes. This is the Chinese way of doing business today and Chinese companies like Xiaomi and Lenovo are leading the way that fits Chinese consumers far better than any western company understands is the best way to own the market first by giving their customers what they want with bigger screens for Chinese language character display and their own personal needs and wants. Which are totally different than Apple's typical market! .....Apple can't expect to sell the same old thing they sell everywhere else... in China!!!
      KronJohn
  • Thanks Jason - Quality Products at Low Cost Win

    Bravo Jason for a comprehensive and balanced look at Lenovo's challenges and opportunities. I am a big believer in trying to understand company competitive advantages. As Jason discussed, I would only emphasize the importance Lenovo has in its chosen markets: Low cost producer. Maybe Lenovo is not the lowest cost producer. But I believe they are lowest cost producer of quality, mid-higher end products. They have a proven track record of cutting costs. Its in their culture. That willingness and ability to keep costs low is crucial to survive and thrive in a commodity business. And all of Lenovo's markets are moving toward commodity status. Plus those sexy Apple and Samsung products have rich profit margins. That allows ample room for a lower priced competitor to slip in quality products. Hey, sex sells. But when your buying a quality phone, tablet, PC, etc. a lower consumer price can be just as seductive.
    oboist1
  • Could this be bad news for Apple, in China?

    Apple is still "getting into China" in the sense that it took this long to ink a deal with China Mobile. With Lenovo, a Chinese company soon to be selling a Chinese owned, brand name like Motorola (under the Lenovo brand?), could that impact sales of iPhone , in China at least?
    William.Farrel
    • It's Elitist CP/M vs MS DOS and Clones All Over Again in China!

      The Chinese Businessmen are some of the most savvy marketers on the planet, because they understand the majority of their people can't afford an Apple or Samsung and Lenovo high end products. So they split their products into 3 model ranges. High End for those who can afford it, Mid priced range for the growing middle classes and low end commodity products to bring in a spread market array of product offerings.

      China Mobile is the largest Mobile Carrier in the World, because they understand the fact that over 70% of their customers can't afford high end smartphones or don't want or need them. Remember that China Mobile would much rather sell you their own Branded smartphones to begin with over Apple's, Lenovo's and Samsung's high end phones, because they make higher margins off those hardware sales, while also making the same monthly carrier fees w/o subsidising Apple while doing so.

      It's a throwback concept and is why Bill Gates was able to swing exclusive distribution of CP/M from Gary Kildall in the first place. Gary had the top selling OS at the time and he to tried to kill the growing clone market like Apple had in Franklin Computers, etc. Only he just like Apple didn't realize that by attempting to kill the clones, he in affect killed the sales of his other software, the clone makers also needed to stay in business. Apple in affect did the same thing in preparation for Lisa Launch, by killing their own software business they were making more money on than selling hardware on anyway. Apple afterall was still primarily a Software company only trying to be a hardware company by way of Elitist Branding in lieu of actually making any of their own hardware themselves.

      Bill however was a whole lot more clever and understood the concept of first saturating the computer market with clones running their own OS and thereby growing a Software Market ripe for the plucking of higher margin Profits!

      By getting Gary Kildall to agree to let MS sell his CP/M, he had him thinking this would make him even richer. Once he had him hooked, Bill jacked the price up on CP/M and then offered MS DOS (and custom clones) at such a deal both enterprise and consumers couldn't refuse to buy their own products and CP/M died over just a few years of competing against Bill's most clever marketing ploy that made him the Richest Man on the Planet! Sell more for less, grow market share and you'll grow your software sales exponentially!

      For Lenovo and China Mobile.... they are using this same marketing plan to a "T"!

      Broaden your own market (in phone sales, App Store software sales and Carrier Services first and your market share will grow at the expense of your competitor locked into exclusive contracts that bear no fruit for your own growth. Apple could not lock China Mobile in on higher subsidies or carrier fee subsidies being fed into their own pockets either. Not only that.... but China Mobile is still selling iOS Apps in their own App Store to all the jail broken iPhone users already using their carrier service plans!

      So in affect.... China Mobile and Lenovo are taking to heart the business model that put Microsoft in the drivers seat on Desktops. That being selling first to grow market share in order to sell greater profit margin Carrier Services and Software sales over remaining in a Niche Elitist Business Mindset that has killed Apple's Market Share over the last 30 yrs! ....so go ahead claim and pretend you're going to sell your Elitist High Margin Products to that 70% of the Chinese Market, that can't afford or don't want to buy your products. But in reality you'll be shooting yourself in your own foot. Because your niche arrogant elitist nose will end up stuffed up your own derriere! ^_* .......again, Apple!!!

      Once your elitist customer market is thoroughly saturated, it'll be all downhill from there!
      KronJohn
  • Lenovo's supply chain sucks

    I bought several laptops from Lenovo late 2012 and early 2013. They were the most painful experiences I have had spending money.

    The first time I ordered from Lenovo - I had to cancel the order before I could get any help on shipment.

    Second time the original (Win 7) Carbon X1 for a new employee was delayed over a MONTH - yet no email from Lenovo. When I contact them it was delayed yet another 1.5 months!! Had to cancel that order and buy a Dell.

    I bought two Yoga' as presents - expected delivery date was before thanksgiving; they arrived the second week of JANUARY! I got a cheap bag and a mouse - as an apology.

    I ordered Win 8 Touch Carbon X1 - it too was two months delayed. That was the last time I ordered from them.

    I think their hardware is great, but their website, ordering process, communication and shipment is crap. The worst is, they do not communicate! You get a order confirmation and then NOTHING. A month will pass by and you wonder what is going on - you have to call them and get several DIFFERENT shipping date - Win8 X1, I had THREE different shipping dates in ONE phone call!! I love their hardware - Carbon X1 was one of the best laptops I have owned. But I would not order from them again - unless they had something really unique.
    Cain69