Lenovo successfully straddles the consumer and enterprise worlds

By Benjamin Cher March 16, 2016

Partnerships key to enterprise market, innovation key to consumer space
Despite slowdown in PC sales, continues with market-share dominance

Lenovo successfully straddles the consumer and enterprise worlds

WHILE other IT giants have been shedding weight just to remain afloat, justifying these harsh decisions as a reflection of business reality, China’s Lenovo Group Ltd stands out like a much welcome sore thumb.

The company that shocked the world in 2005 when it bought over IBM Corp’s iconic PC (personal computer) business, then again in 2014 when it bought the US giant’s x86 server business, is thriving against the odds. It also acquired Motorola Mobility from Google Inc in 2014.

It has maintained its position as the number one PC vendor for 11 straight quarters, with a 21.6% market share according to research firm Gartner. At the other end of the hardware scale is its server business, which is growing quarter-on-quarter.

For its third fiscal quarter (Q3) ended Dec 31, 2015, Lenovo reported revenue of US$12.9 billion, an 8% year-over-year (YoY) decrease, or 2% in constant currency. Net income was US$300 million, up 19%, exceeding analyst’s estimates.

Despite its market-share dominance, PC quarterly sales were down 12% to US$8 billion.

Its Enterprise Business Group, which includes servers, storage, software and services sold under both the ThinkServer and System x brands, recorded sales of US$1.3 billion, up 8% YoY and 12% quarter-to-quarter.

It is a prettier picture than most, and this can be attributed to a combination of Lenovo’s strategy, coverage, investment in people, and innovation, declared its Singapore country general manager Jessie Quek.

“Over the past few years, we have strengthened our go-to-market strategy and channel coverage, and have invested more in people to forge relationships with customers,” she told Digital News Asia (DNA) in Singapore recently.

“At the same time, we invested in our channel partners, with incentives as well as continued innovation – which is in our DNA (deoxyribonucleic acid),” she added.

Lenovo has been forging strategic partnerships with a diverse array of companies, from enterprise resource planning specialist SAP and virtualisation giant VMware, to open source pioneer Red Hat and hyperconverged specialist Nutanix.

Margins and competition

Lenovo’s strength is its ability to provide end-to-end technology solutions, from PCs and servers to smartphones, Quek (pic above) argued.

This also complements its go-to market strategy, she said: “In our go-to market strategy, we always talk about ‘protect and attack,’ and this is part of the way we want to grow our business.”

It’s about protecting existing core businesses, such as PCs, while attacking new market opportunities represented by its server and smartphone businesses.

Hardware costs have been driven down in recent years, taking a chunk out of the lucrative enterprise market.

But this is a challenge that Lenovo has managed to overcome, Quek declared.

“The fact that we are able to lead in market share 11 years after buying IBM’s PC division in 2005, shows that we are able to drive scale – that gives us the efficiency and productivity to overcome margin pressures,” she said.

“Our continued leaps in terms of innovation allow us to deliver faster-to-market premium products,” she claimed. “We are fast in terms of transforming the business and our business models.”

Then there is the competition from unexpected sources, such as erstwhile partner Microsoft Corp and its Surface hybrid devices.

“While it competes with us, it is also our strategic partner, and we continue to work closely with Microsoft,” said Quek.

“We do accept that competition does happen, but our focus is to deliver the best to meet the needs of our customers,” she added.

Investments and innovation

For the coming year, Lenovo will continue with its current strategy of investing in innovation as well as finding new strategic partners, according to Quek.

The innovation drive will be key for its PC, server and smartphone businesses, while partnerships will be key to its enterprise business, she added.

And investments will include people, “not just in our own people but in our channel partners as well,” said Quek.

According to DNA sources, Lenovo has been experiencing high staff turnovers, allegations which Quek refuted.

“Overall, my Singapore organisation has been quite stable. Obviously there has been some attrition, but in the last year it has been quite stable.

“If anything, I’d say we are adding more people into the country operations, and I have increased my headcount by at least 30% since last year,” she added.

Increasing headcount might continue despite the economic volatility, according to Quek.

“We have invested more into our touch points with customers and with partners.

“We are still expecting to grow the business, we still see potential here in the Singapore market … although we are mindful of the overall economic slowdown,” she added.

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