Lenovo makes smartphone play

PC maker to soon start selling smartphones in India. Can it become global number one?

Lenovo Group Ltd said slowing demand in the personal-computer market, where it overtook Hewlett-Packard Co (HP) as the global leader last quarter, was good reason for the company to expand into smartphones.

Lenovo, founded in 1984 with the equivalent of $25,000, has swelled to become a manufacturer valued at $8.4 billion, helped by takeovers, including International Business Machines Corp’s personal computer (PC) unit in 2005.

Lenovo was already the second-largest smartphone maker in China and planed to seize the top spot from Samsung Electronics, Milko Van Duijl, president for the Asia-Pacific and Latin America regions, said in Hong Kong today. “Our goal is definitely to get to number one and not only to take smartphones into the China market but also into emerging markets.”

Van Duijl said Lenovo had just begun selling handsets in Indonesia and India would follow, as Chief Executive Officer Yang Yuanqing moved closer to his goal of extending its PC dominance to smartphones and tablet computers.

“Despite the challenges in the global PC market, Lenovo continues to expand in both emerging markets and mature markets at the expense of its competitors,” Miles Xie, a Hong Kong-based analyst with Bocom International Holdings Co, wrote in a report today. Lenovo’s efforts are allowing the company to “rapidly expand its market share in the China smartphone market,” wrote Xie, who has a buy rating on the shares.

Lenovo, whose headquarters are in Beijing and Morrisville, North Carolina, closed at HK$6.33 in Hong Kong trading, unchanged from yesterday. The Hang Seng Index rose 0.5 percent.

Definite easing
“There is definitely a slowdown in the market in all parts of the world, however, we are so strong in China that was a good reason for us to expand into smartphones,” Van Duijl said.

In China, Lenovo has a smartphone market share of 11.5 per cent, surpassing the iPhone, Van Duijl said, without giving a figure for the Apple device.

As Lenovo expands in mobile devices, the company would build its own cloud-computing services and online store to create an eco-system for the products, he said. Lenovo won’t make its own mobile operating system and would stick with Google’s Android and Microsoft Windows 8, Van Duijl said.

Worldwide PC shipments fell 8.3 per cent from a year earlier to 87.5 million in the third quarter, according to Stamford, Connecticut-based Gartner Inc.

Temporary Slowdown
Lenovo saw the PC market slowdown as temporary, Van Duijl said. Global PC shipments would rise to 530 million units within two to three years, from 350 million units now, he said. Lenovo accounted for 15.7 per cent of global PC shipments last quarter, overtaking Hewlett-Packard, with 15.5 per cent, for the first time, Gartner said earlier.

The Chinese firm narrowed HP’s lead in the quarter with a market share of 15.7 per cent, compared with 15.9 per cent for the Palo Alto, California-based maker, according to IDC, another market researcher. IDC’s study included so-called workstations, the more powerful desktop devices used for such tasks as engineering, architecture and video-game development.

Yang said Lenovo would take steps to become the “clear leader” in PCs and leverage that dominance to head the market for mobile devices in what he called the “PC-plus era.”

“Becoming the clear leader in global PC share of course remains one of Lenovo’s aspirations, but it also only represents one more milestone in our journey as a company and our mission to become the leader in the PC+ era,” Yang said. “This includes PCs, tablets, smartphones, smart TVs, cloud and enterprise computing.”

Lenovo was still at least two years away from making “meaningful inroads” in mobile devices in the US or Europe, said Jean-Louis Lafayeedney, an analyst at JI Asia in Hong Kong. “Undoubtedly, Lenovo’s market share gains against competitors has been impressive” in PCs, Lafayeedney said in an e-mail. “In terms of tablets and smartphones, the company has yet to prove it can extend its reach beyond China and some periphery countries.”