Lenovo says overseas consumer set to drive growth

 @ibtimes
on September 07 2007 4:48 PM

Lenovo Group Ltd., the world's third-largest PC maker, said on Thursday its nascent overseas consumer market will grow eventually to match the dominate position it enjoys in its home market.

Lenovo now commands 36 percent of the mainland China PC market -- three times larger than runner up Founder Computer -- while consumer PCs make up 40 percent of that total business.

While Lenovo's consumer market share overseas is typically 3-5 percent, Yang Yuanqing, Lenovo's chairman, said it will continue to grow and eventually reach 40 percent.

Absolutely, it will be the same as in China, Yang said during the Reuters China Century Summit.

While Yang, who was in Dalian for the World Economic Forum, did not give a timeframe, he was very optimistic his company could conquer the highly competitive consumer PC market.

The consumer market will be a key growth driver in the next 3-5 years, he said.

If the company is successful in creating a global brand for consumer PCs, it could lead to the introduction of Lenovo mobile phones, servers and other peripherals on overseas markets, he said.

But PCs remain the focus overseas for Lenovo, which could lose its world PC ranking to Taiwan's Acer Inc. -- which said last week it would buy loss-making Gateway Inc for $710 million to double its U.S. presence.

Yang was not bothered by the challenge from Acer.

The PC industry has always been an intensely competitive business. We are not afraid of competition.

ORGANIC GROWTH

Acer was paying a hefty premium for the loss-making Gateway, which was also eyeing a small European PC maker, Packard Bell BV, in another potential setback for Lenovo.

Lenovo had also been courting Packard Bell to expand its relatively weak presence in Europe.

The company now must build its own distribution channel in Europe and the United States as it expands into the consumer PC segment, where it must deal with more competitors and higher inventory and logistics costs.

But Lenovo, one of only a few Chinese firms trying to build a global brand after success at home, has been buoyed by recent strong profits as the benefits from integrating IBM's PC business, which it bought in 2005, begin to materialize.

Lenovo posted a 13-fold surge in the most recent quarterly earnings, lifted by corporate spending on new technology.

We have successfully integrated two companies, he said.

For the next step Yang wants to move Lenovo deeper into global markets and consumer PCs.

But Lenovo's recent strong profits come as a resurgent Dell and Hewlett Packard have made progress in Lenovo's home market -- the world's No. 2 PC market.

Our target is not just to defend market share, we want to gain market share, he said.

Yang says the plan is simple.

You must build a more efficient business model across the world ... and meet customers' demands.

If they want more stylish products, then absolutely we will build more stylish products.

To meet those ends the company plans to launch a range of notebooks in January and desktops in March or April, rounding out its product range. Lenovo's PCs are tailored primarily for corporations and governments.

Its branding move face a critical test next year when Beijing hosts the Olympics, for which Lenovo is a corporate sponsor, offering it a unique branding opportunity.

We will do our best to leverage the (Olympics) platform to promote our brand. It is very important.

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