Lenovo going on matchmaking spree to transform enterprise business into US$5bln operation in 2016

World’s top PC supplier anticipates 6th straight quarter of growth for unit that includes Think Server, System X

PUBLISHED : Friday, 12 February, 2016, 8:03pm
UPDATED : Friday, 12 February, 2016, 8:16pm

Computer giant Lenovo Group is betting on a range of strategic technology partnerships to help its enterprise business move closer to becoming a US$5-billion-a-year operation this year.

That is a key strategy for Lenovo, the world’s largest personal computer supplier, as it expects to grow revenue of this business unit for the sixth consecutive quarter since buying IBM’s x86 server division for US$2.1 billion in 2014.

“We’re building the foundations of our enterprise business carefully, picking the right partners, growing profit and revenue every quarter, and getting the wins,” Lenovo executive vice-president Gerry Smith told the South China Morning Post.

“We’re gaining share and getting more credibility in the market,” he said.

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“You’re only as a good as your last quarter in the PC business, while it’s more of a long-term play in the enterprise business.”

The company’s enterprise operation, which includes the Think Server and System X lines, grew 8 per cent year-on-year to US$1.3 billion in its fiscal third quarter which ended on December 31.

It was the only business unit of Lenovo to record year-on-year growth during that quarter as sales declined at its personal computer and mobile device operations.

Jefferies equity analyst Ken Hui attributed that progress in enterprise activity to Lenovo’s aggressive move into the so-called hyperscale markets, in which technology alliances helped drive volume in terms of supply contracts won.

The hyperscale market refers to a more flexible computing architecture that allows servers, storage, networking and software inside data centres to support the increased demand for cloud computing activities without requiring more physical space, cooling or electrical power.

Data centres are secure, temperature-controlled facilities built to house large-capacity servers and data-storage systems, and feature multiple power sources and high-bandwidth internet connections.

These host cloud computing operations, which enable companies to buy, lease, sell or distribute software and other digital resources online, just like electricity from a power grid.

The data centres run by the likes of Facebook, Google and Amazon use customised hyperscale computing systems based on their particular requirements.

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Smith said Lenovo’s enterprise business is currently being driven by wins in mainland China with the country’s “big three” internet players - Baidu, Alibaba Group and Tencent Holdings.

He pointed out that recent partnerships formed with the likes of Nutanix, Red Hat and German software giant SAP are helping differentiate the company’s offering while also strengthening its competitiveness.

“We’re sort of the Switzerland of the enterprise space because we have no legacy technologies,” he said.

“If you look at the structure of Hewlett-Packard, Dell and even Cisco Systems, which have made a number of acquisitions over the years, it’s so much harder for them to partner with technology companies that are being disruptive.”

Lenovo expects to make more partnership announcements this calendar year as demand for data centre services around the world continues to expand.

“With our partners, we’re going after other large customers in the US, Europe, the Middle East, Africa and other markets,” Smith said.

Research firm Gartner has forecast global spending on data centre systems, including servers and storage devices, would grow 3 per cent this year to US$175 billion, up from US$170 billion last year.