Lenovo: PC industry consolidation coming, acquisitions possible
"There is no doubt in this economic situation that you will see consolidation of the PC industry," William Amelio said at a news conference today, according to a Reuters wire story.
Profit margins at Lenovo have dropped as intense competition from Hewlett-Packard, Dell and Acer takes its toll on business. Just last month, Lenovo posted a 78 percent drop in its second quarter net profit.
"In the course of the last several quarters, we saw first India slow down as a nation, then PC shipments as well, and Russia. Now China has slowed down significantly, and that has a big impact on our growth rate overall," Amelio said.
Amelio also said the company's commercial business segment had been hit especially hard as companies cut back on technology spending, but the situation could improve next year as firms resume spending on tech.
Should we expect job cuts and restructuring at Lenovo? Amelio didn't deny the possibility but failed to elaborate further. What he did say, however, is that his company is open to possible acquisitions to help drive growth. Lenovo has been rumored to have interest in Fujitsu-Siemens's PC division and Brazil's Positivo Informatica SA, that country's biggest computer maker.
Much of Lenovo's fate has to do with how the Chinese economy fares in coming months. Lenovo Chairman Yang Yuanqin, speaking at the same news conference, said he remained optimistic that China's economy would continue growing by about 8 or 9 percent annually in the next few years.
That's a bold statement to make considering that, after five years of growth in excess of 10 percent, China’s economy is weakening, with growth in exports and investment slowing, consumer confidence waning and stock and property markets faring poorly.
Can Lenovo grow faster than the industry average in coming years, as Yuanqin declared? Lenovo's shares, traded in Hong Kong, have slumped 75 percent so far this year (in comparison, the benchmark Hang Seng Index fell 47 percent induring the same period). The only way I can see that happening is if the industry average performs poorly.
What do you think?