Lenovo has its eyes on Dell's portion of the education and government markets, Bloomberg reported Aug. 6, following an interview with Lenovo Vice President and General Manager Thomas Looney.
While Dell has tried to make more inroads into the consumer market, the Texas-based PC maker still makes most of its money in the enterprise and with specific markets, such as local and state governments.
In the interview, Looney was straightforward about Lenovo's ambition, saying that Dell is "the weakest kid on the playground right now."
To stay with the analogy, Lenovo sees no problem in going after Dell's lunch money.
"Dell is highly penetrated in the K-12, federal, state and local," Looney told Bloomberg. "That's why I'm attacking now in those segments of the market. I can price very aggressively, and I've got the right products."
For several years, Lenovo has been focused on beating market leader Hewlett-Packard, and analysts have forecast that such a move was only a matter of time. After Lenovo posted 44 percent year-on-year growth during the first quarter, while the industry nudged ahead just 2 percent, Technology Business Research analyst Ezra Gottheil wrote that he expected Lenovo to overtake HP by the second or third quarter of this year. The contest, Gottheil added, was between HP's scale and global brand and Lenovo's "momentum and willingness to absorb lower margins."
Both assets will also work for it as it looks to take market share from Dell. Roger Kay, principal analyst with Endpoint Technologies and a consultant to both Lenovo and Dell, also mentions Lenovo's momentum as a factor working in its favor. "They haven't exactly been quiet about their desire to take the top spot," he told eWEEK.
Kay also points to Lenovo's "protect and attack" strategy: It protects its core markets, while attacking new ones.
During the second quarter, Lenovo shipped 12.9 million units, growing 25.2 percent year-on-year, while HP held its lead with shipments of 13.4 million units, which was down 12.3 percent year-on-year, according to data from IDC.
Canalys, which includes tablets in its PC counts, considers Apple to be in the No. 1 spot, but put No. 3 Lenovo close on HP's heels, with the former controlling 12.1 percent of the market during the quarter compared with HP's 12.5 percent.
Dell, which has tumbled from the neck-and-neck race it used to run with HP, shipped 9.6 million PCs during the quarter, according to IDC, and held on to 8.9 percent market shareputting it in fifth place behind Aceraccording to research firm Canalys.
The U.S. consumer represents an area of attack, said Kay, but the government vertical is more fraught. At one point, it may have been a "protected" area, but in 2006 it suffered after a U.S. Representative made the arguably xenophobic assertion that the U.S. State Department should investigate the 16,000 Lenovo-made PCs that it had purchased, to make sure the Chinese government wasn't using them to spy on the United States.
Similar fears had been voiced regarding the 2005 sale of IBM's PC business to Lenovo (a letter from the same representative was involved), forcing the U.S. Treasury Department to agree to review the $1.25 billion sale.
"It was ridiculous," said Kay, "but it did wind up hurting their federal business."
In going after Dell, Lenovo may have better luck pursuing state and local markets, as opposed to federal, Kay said.
As for the education market, Apple has a strong presence and has for some time, said Kay. "Apple understood early on that if you grow the relationship with students when they're young, you can keep harvesting that long after they've left school."
During Apple's last earnings call, CFO Peter Oppenheimer described the iPad as having "tremendous momentum" in the education vertical, with some school districts even buying a tablet for every teacher and student.
Given Apple's growth in the segment and overall brand appealit was the iPhone that paved the wave for consumer devices into enterprisesLenovo may understandably view Dell and its shares as the easier target.
After Microsoft introduces Windows 8 on Oct. 26, Lenovo plans to introduce a tablet of its own, though it will focus it on government customers, Looney said in the interview, adding that Lenovo's ability to develop products for particular segments is a big difference-maker for the company.
A Dell spokesperson, reported Bloomberg, defended the brand, remarking that while Lenovo "may be putting a lot of its focus on Dell, our focus continues to be on our customers ¦"