Lenovo picks new targets in Samsung, Apple
After years of nonstop talk about making Lenovo (0992.HK) the world's largest PC brand, CEO Yang Yuanqing is readjusting his sights these days onto competing with global smartphone and tablet PC leaders Apple (Nasdaq: AAPL) and Samsung (Seoul: 005930). On the one hand, I have to congratulate Yang for finally focusing on the right targets in his quest to build Lenovo into a true global computing leader. But on the other hand, I have serious doubts about whether Yang can challenge either Apple or Samsung, despite his success in overtaking Hewlett-Packard (NYSE: HPQ) briefly last year to become the world's largest PC brand.
Let's take a look at Yang's latest thoughts on the subject, which come in a report quoting him saying Lenovo is in the process of a major transformation into mobile computing devices. Most industry followers will know that this shift isn't unique to Lenovo, and is seeing most major PC makers try to quickly boost their lineups of wireless, mobile products like smartphones and tablet PCs. HP, Dell (Nasdaq: DELL) and Acer (Taipei: 2353) are all trying to make similar shifts, though none have had much success to date competing with Apple or Samsung.
Lenovo made headlines in last year's third quarter when it finally surpassed HP to become the world's biggest PC seller, even though it slipped back to second place in the fourth quarter. I commented at the time that Lenovo's attainment of the PC crown, while commendable, was largely a hollow victory since traditional PC's were quickly becoming an obsolete product.
Yang seemed to quickly realise that point too, and began talking about challenging Apple and Samsung during Lenovo's media briefing in January after the release of its latest quarterly earnings. Yang reportedly made his point again at a meeting of top company executives late last week in the US, where another executive pointed to the struggling Nokia (Helsinki: NOK1V) as a company whose future was in peril due to its failure to make a similar transition.
Personally speaking, I'm glad to see Lenovo finally turning its attention away from the largely superficial global PC crown to the weightier issue of its future direction and survival. Whether or not Lenovo can successfully make such a transition is a different matter. As much as I would like to see it succeed, I'm not entirely convinced the company has the savvy it needs to challenge Apple and Samsung, and would give it just a 50-50 chance of success.
In terms of smartphones, Lenovo has quickly risen to become one of China's top brands following its decision to re-enter the market several years ago. But Lenovo's smartphone success so far has come largely in the highly competitive low-end business, an area where margins are thin due to fierce competition from other homegrown rivals like Huawei and ZTE (0763.HK; Shenzhen: 000063).
Lenovo has realised the importance of moving to the higher-end, and is in the process of developing a premium brand with its Think line of products, which it inherited with its purchase of IBM's PC business in 2005. The Think business is based in the US at the old IBM headquarters, giving it access to many of the latest design technologies and putting it closer to western consumers that generally drive much of the higher-end business.
I have yet to hear Lenovo announce any plans to create a Think line of smartphones, though I wouldn't be surprised to see a development in this direction over the next year as it sharpens its premium strategy. At the end of the day, Lenovo certainly has the resources to develop and sell products that compete with Apple and Samsung; but only time will tell if it can successfully leverage those assets to become a true leader in mobile computing devices.
Bottom line: Lenovo's shift to high-end mobile devices is a smart move, but lack of experience will limit its chances of success at just 50 per cent.
To read more commentaries from Doug Young, visit youngchinabiz.com