TheTorinoOlympic Winter Games offered Lenovo a world stage for its "coming out party" and the introduction of its own branded PCs. What does the next phase have in store for the Chinese PC maker?
Olympic Games are full of special moments, they say. And for Lenovo, the winter Olympics, which came to an end last week in Torino, Italy, provided no end of these. It was what the Chinese PC maker, an official Olympic partner, had been patiently waiting for since it bought IBM’s PC business for $1.25 billion last May; the moment it would tell the world who it was, and what it could do.
"Only ten months after creating the third largest PC company in the world, we are the computing equipment sponsor of the Olympic Games. It has been a huge achievement," Vincent Fauquenot, director of marketing & channels Lenovo EMEA, told OPI+. "Being for the first time a top sponsor associated with other big brands generated a lot of attention from media, our customers, our partners and we leveraged this sponsorship to demonstrate our technological leadership and our global strategy."
Lenovo’s "global strategy", which has been quiet over the last few months, now looks set to become clearer. In line with its Olympic sponsorship, the computer maker announced it will unveil Lenovo branded computers for the first time outside China and across the world – "and specifically in EMEA countries", OPI+ was told – as part of a wide reaching exercise to push the brand.
Lenovo, which evaluates name recognition in 12 countries every quarter, has introduced a line of low-priced desktops and laptops aimed at small business customers, which will inject new competition into the market dominated by Hewlett-Packard and Dell. The ThinkPad laptop and ThinkCentre desktop brands, which Lenovo inherited from IBM, have been sold primarily to large corporations.
The PC maker currently has 5 per cent of the world’s notebook and desktop market outside China and is confident that it can significantly boost this share over time, although it has declined to release any specific figures. Fauquenot said: "Without giving any number on our future performance, we can probably say that our previous Think offering was optimised for more than 500 client companies where we’re performing well. The new range is fully optimised for less than 500 client companies where the opportunity and the growth are very significant.
"We have clearly accomplished a great deal in the months since the acquisition," he added. "We’ve integrated the IBM PC division ahead of schedule and introduced terrific new products, like the tablet, widescreen, and now, the Lenovo brand outside of China."
Since the IBM deal, Lenovo has been bold in its aims to grow at twice the industry growth rate over the next five years to become the "best PC brand in the world". But the company’s chairman Yang Yuanqing has always warned investors not to expect rapid growth following the IBM purchase because the company would focus on "long-term success".
Indeed, short-term figures have not always been encouraging for Lenovo, particularly in EMEA. In Q4, the PC maker registered negative growth of -7 per cent overall; in desktops negative growth was -20 per cent, which partly explains Lenovo’s current plans to focus on that geographic.
In addition, the company has been criticised of late for its weakness in the small business and consumer segment, which some analysts say has been down to Lenovo’s poor brand awareness. Ranjit Atwal, PC analyst at Gartner, told OPI+ in January that the company has not moved as fast as it needed to to address the consumer market quickly. "It could have made gains with an IBM/Lenovo consumer product but it missed that opportunity. Lenovo was looking good a while ago, but it is still in the IBM frame of mind. It needs its own identity."
Atwal told OPI+ this week that the negative growth rates in EMEA signify that Lenovo has had problems communicating with its core customers in these areas. "There is obviously a big issue here," he said. "The company hasn’t really communicated to most of its large clients outside China what its IBM merger means, where its transition is going and what it is doing with its products. It has not been a smooth transition given the impact on volumes, especially in Europe."
But Atwal added that Lenovo’s move to push its own branded PCs worldwide will allow it to become more competitive at entry level and in this way will fill a gap where the company is not as competitive as it should be currently. And because products will be price competitive as well, Lenovo’s overall positioning should improve, he said.
Randy Giusto, group VP of client, mobility and consumer markets at IDC, believes that Lenovo was right to move slowly in pushing Lenovo-branded products outside China following the IBM deal. "Most of the time, you temporarily shelve product plans until the integration is nearly completed," he told OPI+. "For Lenovo to push out its own branded products globally just after it started the massive integration plan would have been a very challenging goal. It also would have confused a lot of IBM branded major accounts that needed reassuring in the first 90-120 days that things were not going to drastically change when it came to the ThinkPad and ThinkCenter business.
"The year 2005 was the year to integrate the two entities, not the year to drive a new Lenovo brand outside of China," he added. "If it would have done both, it would have been distracted and neither would have been successful. Lenovo has a lot of opportunity to raise its worldwide market share."
Giusto is confident that although US and Europe may not be the catalysts for that share growth (he admits that it will be harder for the company to grow share there), Lenovo will be able to increase market share well beyond 5 per cent by targeting emerging markets such as Brazil and India with its own branded products. Indeed, Lenovo has already singled out these countries as markets where it believes it has opportunities to go up against regional brands as well as the global brands doing business.
Let’s hope that among last week’s Olympic fever, the Brazilians and Indians were watching.