Lenovo Gaining on HP in PCs, Thanks to China, Low-Cost Device Strategy
Lenovo will soon overtake longtime PC sales leader HP, according to several analyst reports released this week. Experts are pointing to its diverse product strategy, success in China and lower-margin PCs.
Lenovo, which recently introduced several lines of new products, seems every bit as poised to shake up the mobile industry as China and its growing middle class.
Lenovo is on track to overtake global PC sales leader Hewlett-Packard, as it works its way into emerging markets and keeps a steady focus on China, Technology Business Research analyst Beau Skonieczny said in a May 23 research report.
While the worldwide PC market grew by nearly 2 percent during the first quarter, Lenovo saw unit sales "soar" by 44 percent year-over-year. The cost of such growth, however, is being felt by Lenovo's bottom line. Apple and HP are expected to still dominate Lenovo, whose strategy relies on lower-margin products, in terms of profitability.
Still, "Lenovo outpaced its peers by maintaining balanced growth across both desktops and notebooks, supported by increased brand awareness in SMB [small and midsize business] and consumer markets," stated the report.
TBR analyst Ezra Gottheil, in a May 22 report, likewise predicted that the fast-rising Lenovo "will surpass HP in unit shipments of PCs," putting the timeline as soon as the second or third quarter of this year. (By research firm Gartner's count, Lenovo posted 28 percent quarterly growth to HP's 3.5 percent.)
"Going forward, as both companies execute well, the contest will be between Lenovo's momentum and willingness to absorb lower margins and HP's overall scale and stronger global brand," wrote Gottheil.
A big part of that momentum is China, where Lenovo's smartphone sales are also increasingunits sales jumped from 100,000 units during the first quarter of 2011 to more than a million during the 2012 first quarter. Given the success it's seeing in Chinawhich during the first quarter, with big help from the Apple iPhone, overtook the United States as the world's largest smartphone marketTBR expects Lenovo to begin pitching the phones in new emerging markets such as India later this year.
And of course, a TV wouldn't hurt.
"TBR believes adding a smart TV to Lenovos product portfolio will better position the company to drive stronger sales of other product lines to customers in China," wrote Skonieczny. "Lenovos four-screen strategy will allow the company to capture customer consumption needs across the entire device spectrum: PCs, tablets, smartphones and smart TVs."
Earlier this month, Lenovo introduced the Smart TV. Running a dual-core 1.5GHz Qualcomm CPU, it's the first TV to run Google's Android 4.0, known as Ice Cream Sandwich.
"As a global leader in the PC industry, our customers look to us to provide new technologies, and as we drive further into the 'PC-plus era,' we will continue to introduce new products worldwide," Lenovo CEO and Group Chairman Yang Yuanqing said in a May 8 statement.
The timing of the Smart TV coincided with Lenovo breaking ground for a new facility, where it said it plans to invest $800 million toward mobile Internet product research and development, as well as sales. At the Consumer Electronics Show in January, Lenovo executive Liu Jun showed off the very first Intel Atom phone, the Lenovo K800, an Android 4.0-based smartphone with a 4.5-inch 720p display that's expected to be offered by China Unicom later this year.
By "accelerating development in smartphones, tablets and other mobile Internet terminal markets," Yang added, "were determined to firmly seize the tremendous opportunities for innovation in this market.