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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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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
quote:
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.


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