Lenovo set to take top PC maker crown, but at what cost?

Chinese PC maker Lenovo could take the top spot as the world's biggest PC maker in a matter of weeks. But its lack of tablet experience in the post-PC world and low profit margins could hit the firm.
Written by Zack Whittaker, Contributor

There's a new world order in the PC making business, and China is about to take the lead. 

Everyone knows that HP makes computers, as do Dell. But the word on the street of Lenovo still comes back with a muted pause. It's the silent market killer and it sneaked up on the other PC makers like a stealthy ninja. 

In a matter of weeks, the China-based PC builder will likely overtake HP as the world's biggest PC manufacturer, making the company the first Chinese company to take the lead over all others in the technology space, despite many taking podium positions in other spaces.

Breaking down the numbers: IDC data released last week pegged Lenovo in second place at 14.9 percent market share behind HP's 15.5 percent. HP continues to decline by double-digits each quarter, while Lenovo is rocketing ahead. Dell remains at third place after Lenovo leapfrogged the PC giant some quarters back; it's falling at similar numbers to HP. comScore narrowed the gap, suggesting the market share difference could be as little as 0.2 percent.

Either way you look at it, this quarter's end should yield some interesting results.

But while Lenovo sprints to lead the race, its profit margin could hold it back in the long run. Beyond all else, its retail price to profit ratio helped the PC maker jump as far ahead as it has. 

According to Reuters, latest Thomson Reuters data puts HP's profit margin at 7.4 percent, Dell's at 6.2 percent, while Lenovo's is way behind at around 1.4 percent --- down from 1.8 percent last quarter.

The post-PC (or "PC+" --- we're splitting hairs here) industry is changing in the face of sales, rather than profit. Plus, as ZDNet's Larry Dignan explains, because it's already on the same turf as others in the outsourcing space, it can in-house develop and manufacture products without having to turn to a third-party like Foxconn.

While China still accounts for a majority of Lenovo's revenue, U.S. and European markets still take up a significant portion. 

Despite its lacking ability and expertise in the tablet market, and a stagnant string of quarters in the PC building industry, it's an almost impossible feat to reach breakneck speeds while soaring through custard, treacle, or something equally thick and gooey. 

The big question remains over whether or not the company can maintain it. Just as HP and Dell's profits are up but sales are down, Lenovo is switching paths with its entirely different reverse approach. 

Image credit: Lenovo.

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