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Company is eyeing expansions into the server and storage markets, plus smartphone expansion, but remains PC loyal

Beijing, China-based Lenovo Group, Ltd. (HKG:0992) is intent on continuing its meteoric rise and ambitious plans to displace traditional personal computer OEMs like Hewlett-Packard Comp. (HPQ) atop the list in international computer shipments. Currently in second place in PC sales, Lenovo opened a $1B USD line in North Carolina.  And already #3 in Chinese smartphone sales, Lenovo is eyeing a U.S. smartphone push.

But its plans don't stop there.

I. IBM Server Division is on Lenovo's Radar

CEO Yang Yuanqing spoke to reporters in the southwestern city of Chengdu, China at the Fortune Global Forum, commenting, "Servers and storage is the business we want to expand and develop.  If there is an acquisition opportunity, we will take it."

Having already purchased International Business Machines, Inc.'s (IBM) personal computer business back in 2005, Lenovo is rumored to be considering jumping straight to the top of the server market, exploring a purchase of the veteran U.S. firm's server business.  

Yang Yuanqing
Lenovo CEO Yang Yuanqing [Image Source: Reuters]

IBM's server unit is currently vying with HP's for the top spot in global sales.  When it comes to a sale to Lenovo, though, price has reportedly been a stumbling block in the pair's discussions.  

IBM Servers
Lenovo is greedily eyeing IBM's server division. [Image Source: IBM]

Servers are a lucrative and coveted business.  Server sales have helped U.S. manufacturers like HP and Dell, Inc. (DELL).  Chipmaker Advanced Micro Devices, Inc. (AMD) recently spent $334M USD to acquire server-maker SeaMicro.  So far that deal has been working out well for AMD, who like its PC OEM counterparts is using its server unit to offset losses from other divisions.

II. Tough Challenges Ahead to Keep up With Exploding Smartphone Growth 

He also discussed the smartphone push, explaining that his company's plan is to first expand into other emerging markets (like Brazil or Mexico) then move on to the most profitable top markets, like the U.S. He comments, "We will be in developed markets in a year.  The gross margin for smartphones is better than PCs -- when you have scale, you will make money."

Lenovo will have to vie with domestic rival Huawei Technologies Comp. (SHE:002502), who has similar ambitions.  Huawei is still outselling Lenovo in the smartphone market moving 9.9 million smartphones in the Q1 2013, versus 7.9 million for Lenovo.  But Lenovo is growing faster -- its sales more than double from a mere 2.5 million units in Q1 2012, while Huawei's sales "merely" doubled from 5.1 million in Q1 2012 [source].

The gadgetmaker also faces a tough challenge from market giants Apple, Inc. (AAPL) and Samsung Electronics Comp., Ltd. (KSC:005930) who spent years carefully generating strong brand images in the U.S. and Europe.

Lenovo smartphone
Lenovo is eyeing a global smartphone push. [Image Source: Jason Mick/DailyTech]

Lenovo also bucked the general slump in the PC market, essentially holding steady at 11.7 million units.  Combined with the strong smartphone growth, Lenovo managed to increase its profit 90 percent on a year-to-year basis.

Mr. Yang says the key reason why his company is hanging on while other PC manufactuers drop off is his company's willingness to offer optimized hybrid form-factors like the Lenovo Yoga tablets-cum-laptops.  He comments, "The PC will not die.  [But] the future PC is not the past PC."

Source: WSJ

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By Motoman on 6/7/2013 8:12:39 PM , Rating: 1
Of course the PC won't die. Your phone is a PC. Your tablet is a PC. I wouldn't be surprised if your next toaster is a PC.

Smartphones and tablets are nothing more, and nothing less, than new form factors of PCs.

Lenovo's convertible design is the best in the business...that's the form that "tablet" computers should have.

But anyway, once again, we need to stop with the retarded "PC is dead" BS. The PC is more important and pervasive than ever. It's just that now it can fit in your pocket.

RE: duh.
By Flunk on 6/7/2013 8:18:40 PM , Rating: 3
Exactly, I'm just glad that tiny PCs are quickly replacing cellphones. You remember, cellphones, slow, crashy, hard to use and featureless phones that just called people. I hardly ever use the phone function on my smartphone at all.

RE: duh.
By Shig on 6/7/2013 8:56:39 PM , Rating: 3
Ubiquitous computing is close, but ubiquitous broadband is a fairy tale for the United States.

RE: duh.
By StevoLincolnite on 6/7/2013 9:10:14 PM , Rating: 3
Well... "Real broadband" is due to lack of competition apparently.

Besides, instead of your Government spending trillions bailing out companies, they should have set aside 100 Billion (Or there-abouts) and rolled out fiber to every home. - Would have created jobs, would have improved your digital economy... And the people get something out of it for once! :P

Our Australian Government is doing it for about $40 Billion, lower population density though, but land-area is still massive.

RE: duh.
By Reclaimer77 on 6/7/13, Rating: 0
RE: duh.
By StevoLincolnite on 6/8/2013 12:04:20 AM , Rating: 2
That's half the problem. Elect a government that's more competent with the peoples money.

Spend money improving infrastructure which will create jobs and business's rather than propping up failed business models.

Conversely, if a tiny nation such as Australia can do it, surely the country that landed on the moon could?

RE: duh.
By lagomorpha on 6/8/2013 9:12:03 AM , Rating: 2
Iirc it was PJ O'rourke that had a really good way of framing why government spending isn't just usually incompetent, it's as a rule imcompetent.

There are 4 kinds of spending:
1) Spending your own money on yourself in which case you're concerned about getting a low price and good quality
2) Spending your own money to buy something for someone else in which case you're concerned about getting a low price but are less concerned with quality
3) Spending someone else's money on yourself in which case you don't care about the price but want good quality
4) Spending someone else's money on someone else in which case you con't care about the price or the quality

All government spending falls into category 4.

RE: duh.
By Reclaimer77 on 6/9/2013 10:18:12 AM , Rating: 2
Elect a government that's more competent with the peoples money.

Okay sure I'll get right on that. Next week sound good to you? :)

lol ok all jokes aside, there's really no such thing as a Government that's efficient with other people's money.

RE: duh.
By TSS on 6/8/2013 6:33:43 AM , Rating: 2
Break the government mandated monopolies on internet companies and it'd be entirely possible within the decade.

yknow, not counting financial markets.

RE: duh.
By Reclaimer77 on 6/7/2013 10:55:49 PM , Rating: 4
Smartphones and tablets are nothing more, and nothing less, than new form factors of PCs.

People can say this all they want, but when you look up the statistics of "PC" sales, tablets and smartphones aren't on this list.

"PC" still means a desktop computer or laptop, like it or not. Smartphones and tablets aren't "new form factors" of the PC.

RE: duh.
By Shig on 6/7/2013 11:57:04 PM , Rating: 2
Always makin' trouble aren't you?

RE: duh.
By Piiman on 6/8/2013 4:41:12 PM , Rating: 3
"PC" Means "Personal Computer" All of those are in fact "Personal Computers"

RE: duh.
By croc on 6/8/2013 8:47:06 PM , Rating: 1
To quote Lenovo's CEO Yang:

"The PC will not die. [But] the future PC is not the past PC."

Pay attention to those that know more than you, you might learn something. Or not...

RE: duh.
By Azethoth on 6/8/2013 5:28:22 PM , Rating: 2
No, you are diluting the term into meaninglessness for no good reason or out of ignorance. "They are all computers" is correct. However PC is the particular form factor that desktops come in. You can throw notebooks in there as well since nobody ever adequately distinguished them or needed to.

So the history of computers so far:
Eniac etc. Building sized monstrosities of which we would only need like maybe 7 for the planet by the time they became city or country sized.

Mainframes. Room sized giants with really high IO.

Minis. Mainframe mini-me. Smaller, less IO.

Servers. Even smaller, weaker versions of the previous, but cheaper and sometimes equivalent when massed together.

SuperComputers. Specialized versions of the above, sometimes just mass clusters of the smaller form factors but with mass IO. Room or building sized.

All the above typically have multiple dumb terminals or individual PC's for user interaction.

PC. Single user at a time computer. Sits on a desk or whatever. The notebook version can roam with you a little on battery power. Both are more or less luggable.

Mobile. Smartphones and Tablets. Freely movable, quite small. First good touch and decent voice interfaces. Hectic UI experimentation to improve interaction.

So what is the future of this progression? Well it is successive nodes that are smaller and thus work in smaller form factors:

Something like Intel's NUC and similar AppleTV sized things?

Google Glass and iWatch perhaps. Other similar body sensors and augmentation eventually.

Smart Dust would certainly be a node of its own.

Eventually it all ends when we have Computronium. This is the final densest / most efficient / most capable computing substance possible in this universe.

So no, phones and tablets are in fact not PC's. By that logic everything is a mainframe, mini, server and supercomputer. The common term you are looking for is "computer".

RE: duh.
By Azethoth on 6/8/2013 5:31:33 PM , Rating: 2
Maybe Jason can fit this into an article so we can lay the specious arguments to rest.

However, it needs more than 3 parts, so maybe not ;-0

RE: duh.
By CSMR on 6/8/2013 5:47:40 PM , Rating: 2
In order to count as PCs smartphones and tablets would need the following:
- Ability to attach to external monitor and other peripherals via standard interfaces.
- Ability to use as a workstation.

No current smartphones currently on sale have these capabilities and so they are not PCs. (The prototype i-mate "Intelegent" smartphone is a PC.)

Only some tablets have these capabilities; only these are PCs.

RE: duh.
By marvdmartian on 6/10/2013 10:17:17 AM , Rating: 2
Not to mention, a desktop PC still has a more robust ability than any smartphone or tablet made, and likely will continue to have it. It's simply a matter of size versus ability. You can only pack so much ability into so small a space.

PC will never die
By Khenglish on 6/9/2013 11:58:17 AM , Rating: 4
Everyone I know who owns a tablet or smartphone also owns a laptop and/or desktop. tablets and smartphones are not a competitive product with PCs, they are a supplement. Tablets and phones are for high mobility and quick use, but when you want to write a paper, do research, watch a movie, play a game, etc, yeah a tablet or smartphone can do it, but it will always be more productive and enjoyable to do so on a 4x larger screen with a full size keyboard and a mouse.

The main reason I think PC sales are declining is not due to tablets and phones, but more so with the slower rate of progress in hardware advancements in the past decade, allowing people to get by with older hardware than they used to. A 1996 computer compared to a 2000 computer was night and day. A 2009 compared to a 2013 is not.

RE: PC will never die
By vXv on 6/9/2013 12:40:42 PM , Rating: 2
Yeah people blindly compare sales numbers and conclude "everyone replaces PCs with smartphones" which is simply BS.

People don't buy new PCs / laptop that much anymore not because they use smartphones and tablets instead but because what they already have is considered "good enough" i.e they have no reason to replace it that often anymore.

RE: PC will never die
By DiscoWade on 6/9/2013 9:39:39 PM , Rating: 2
Another reason is Windows 8. I don't want to get into an argument about Windows 8 but it has contributed to the decline of PC sales. I met someone who ordered a Windows 7 laptop from HP and she told me there was a 2 week delay for Windows 7 laptops because of high demand. Whether you like Windows 8 or not is irrelevant or whether or not its reputation is justified or not is also irrelevant. People don't want it. But for HP to have a 2 week delay with Windows 7 models shows that people want Windows 7 computers.

(By the way, if I understand it correctly, the Windows 7 models do not have the secure boot option which is why they don't try to sell the same laptop for both Windows 8 and Windows 7.)

RE: PC will never die
By ShieTar on 6/11/2013 8:40:38 AM , Rating: 2
Sure, but People who actually have an opinion on Windows 8 are People who already own and use a PC. They are just holding back on replacing their existing PC, but they will very likely do it in the not-so-far future.

Indeed, I do believe that tablets have a stronger impact on PC sales as the perceived quality of Win8 does. Sure, nobody is replacing the PC with a tablet, but a lot of people with a restricted budget for electronic toys will consider to buy their first tablet instead of replacing the still-good-enough PC right now. This will normalize over the next few years, once most people own a good-enough tablet.

Unless some interesting stuff starts happening to the market, e.g. GPUs starting to wander into the screens and tablets getting Thunderbolt interfaces. Then all bets are off.

By mrwassman on 6/8/2013 5:18:54 PM , Rating: 4
I still need a real computer, monitor(s), and human interface devices to do real things like:

Video Editing
Photo editing + Animating
Make music
Make posters
Play games (rare but there)

It would have been next to impossible to model, test, document, digitally record and edit a recent school project on an tablet.

By TheEinstein on 6/7/2013 11:11:57 PM , Rating: 2
Lesson for IBM, Dell, HP, and others...

Lenovo, ASUS, and others are growing because they make products that are quality in nature. They do not need warranty returns, they do not skimp on warranties because their products do not use inferior parts as a means to 'make money'.

You are dying because you failed to keep the customer happy. Why do you think I only buy ASUS at this moment (4 Republic of Gamer laptops in a row, at $1800 apiece after insurance and taxes).


By drycrust3 on 6/8/2013 9:59:46 AM , Rating: 2
He comments, "The PC will not die.

One of the most basic facts of regarding the history of computing is that EVERY computer ever built has been superseded. Sure, a "PC" (I'm guessing a computer that runs a BIOS here) is more of a type of computer than a brand or model, but the fact remains, one day another type of computer will replace it ... in fact it could well be the ARM based tablets and smartphones are exactly that type.
Yes, they are underpowered, yes they can't play games as well as the "PC" computers, but this is early days. It could well be that in two years time an ARM computer will be becoming the normal computer and a "PC" computer will be becoming the "relic of the past".

By kileysmith104 on 6/9/13, Rating: -1
"We’re Apple. We don’t wear suits. We don’t even own suits." -- Apple CEO Steve Jobs

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