Lenovo: Consumer PC market important despite low margins

Chinese PC maker says the consumer PC and mobile device market segments are integral to its growth, but will not cannibalize its enterprise PC business.
Written by Liau Yun Qing, Contributor

TOKYO, JAPAN--Lenovo sees the consumer PC and mobile Internet device markets as important for the company's growth, even if its competitors are finding it tough to maintain profit margins from selling non-enterprise PCs.

Nick Reynolds, executive director of worldwide consumer product launch for Lenovo, explained that consumer PCs and mobile Internet devices are part of the company's "attack" strategy which it has been implementing "aggressively" to gain market share.

The commercial PC unit, which Lenovo acquired from IBM in 2005, is part of its "protect" strategy where the company looks to maintain and safeguard its market share, Reynolds said. 

When Lenovo first took over IBM's commercial PC business, he said its global products were "very commercial" and targeted at large enterprise. Over time, the company grew its share in the consumer space with its "Idea" brand of products, he added, noting that the company is now the market leader for consumer desktops and third in consumer laptop shipments.

Reynolds was responding to reports its PC rivals Dell and Hewlett-Packard were finding it difficult to maintain profitability of their consumer PC lines. While he did not comment directly on the competitors, Reynolds said Lenovo was "very committed in winning the heart and minds of consumers".

Even with the increasing bring-your-own-device trend, though, he noted that the company's consumer PC product line will not cannibalize its commercial PC business.

He believes the consumer PC product segment compliments the vendor's ThinkPad commercial notebook line as business executives still want business-level devices. He said Lenovo's Idea consumer products are attractive options for executives who are not using ThinkPad machines.

Expansion into mobile Internet devices
According to Keith Liu, business development director of mobile Internet digital home at Lenovo Asia-Pacific and Latin America, the company does not believe in a "post PC" era.

Instead, it foresees the PC becoming the heart of users' digital life, supported by secondary devices such as smartphones and tablets as well smart TVs, said Liu. This vision drove the company's efforts to offer its smartphone and tablet devices to the global market, out of its home market in China, he said.

Elaborating on its plans in Southeast Asia, Lenovo is looking to sell its smartphone in India, Indonesia and the Phillipines, he said, but noted that the launch dates will be decided by its distribution partner in the three markets.

Lenovo, which is currently the second-largest smartphone vendor in China, will be assessing user response to its smartphone in the intial three countries and has not decided if it will expand the sale of the mobile device to other Southeast Asian economies, said Liu.

Melissa Chau, research manager for client devices at IDC Asia-Pacific, said consumer brand awareness will be the largest barrier to entry with regard to introducing mobile phones overseas. "To some degree, Lenovo's PC brand awareness may help it somewhat, but it will take a multi-year commitment to educate consumers on what to expect from Lenovo phones," she said.

Chau added that Lenovo will need to develop a unique niche to separate itself from low-end players in the local market, which are often local brands, as well as compete against Samsung which has a broad portfolio from low- to high-end products.

Andi Handoko, senior market analyst for client devices at IDC Asia-Pacific, said in a previous ZDNet Asia report that Lenovo's footprint as a computer maker might impede its success in promoting smartphones as it will be recognized first as a PC brand.

Liu, however, thinks otherwise. The Lenovo executive said as long as the Chinese company is thought of as a brand that can be trusted, users will trust that the devices they buy, even non-PC devices, will work.

Smartphone growth potential in Windows Phone 
Beau Skonieczny, analyst for computing practice at Technology Business Research (TBR), said Lenovo will have a lot of ground to cover in its smartphone expansion but has a chance of success with the upcoming Microsoft mobile operating system.

Skonieczny noted that Microsoft is looking for partners to drive Windows Phone 8 penetration and Lenovo is a prime candidate, especially in China.

"With Windows Phone, Lenovo will also be better able to drive global smartphone penetration, as Google Android-based smartphones have saturated the market and left little room for new competitors to truly differentiate their products, as well as making it difficult to compete on price.

"If Lenovo takes a chance with Windows Phone and puts the full weight of its marketing and product development efforts behind it, the company has a shot at gaining traction in the global smartphone space and perhaps becoming one of the top Windows Phone vendors," the TBR analyst said. "Until then, Lenovo will trickle its Android phones into new test markets around China, to mature its emerging market smartphone sales while continuing to sacrifice profits."

Chinese roots not a factor in Lenovo business
In recent times, Chinese network equipment vendors Huawei and ZTE have been probed by overseas government over espionage concerns.

Despite having its roots in China, Lenovo has not experienced similar concerns, said Howie Lau, vice president of marketing and communications for Lenovo Asia-Pacific and Latin America. He believes the company, with its IBM PC acquisition, is seen as one that has a mix of both Western and Eastern heritage.

As a public company, Lenovo also openly communicates its strategy and has been focused on protecting intellectual property with many patents it calls its own, Lau added.

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