Loving Lenovo

Chinese PC powerhouse Lenovo has already got cracking on its channel recruitment drive in the Middle East signing up both Redington and Almasa. Through the acquisition of IBM’s PC unit, Lenovo picked up a product portfolio that had legendary status among business users.

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By  Stuart Wilson Published  January 25, 2006

Chinese PC powerhouse Lenovo has already got cracking on its channel recruitment drive in the Middle East signing up both Redington and Almasa. Through the acquisition of IBM’s PC unit, Lenovo picked up a product portfolio that had legendary status among business users.

Now it needs to leverage that brand equity alongside the strength of its own name to make inroads into the consumer market as well.

Positioning the Lenovo brand in the Middle East IT market will be an ongoing challenge for the regional management team during 2006. We’re talking about a Chinese brand that acquired the PC unit from a highly respected US company (IBM) and also picked up the ‘Think’ names in the process for a variety of products. Lenovo not only needs to build a product portfolio that appeals to all business segments — enterprise, SMB and consumer — it also needs to develop a channel-to-market that reflects its ambitions in the Middle East market.

Lenovo has made some progress in terms of integrating IBM’s PC division. Its recently released financial results for the quarter ending December 2005 revealed that the Europe, Middle East and Africa (EMEA) region had returned to profitability — reversing a loss recorded in the previous quarter. Total EMEA sales hit US$902m, 22% of Lenovo’s global sales, producing a slender operating profit of US$1.8m. Globally, Lenovo’s third quarter sales hit US$4 billion with pre-tax earnings of US$122m.

“The acquired business has now been profitable for three consecutive quarters, in line with the Board's expectations, although regional performance has varied,” said Yang Yuanqing, Lenovo’s chairman. “Now we must meet even higher expectations. We believe our proven business model, an enhanced product portfolio, and a heightened focus on operational efficiency will enable us to optimise profitability across the globe. We are moving quickly to address these issues and to take advantage of the strong demand that exists for our products.”

William Amelio, who joined Lenovo in December as president and chief executive officer, said: “Around the world, the Lenovo and Think brands stand for the highest standards of innovation, performance, and service. Excellent progress in recognizing the potential of this company has been made, but our path going forward is very clear.”

“We must first keep a laser sharp focus on our cost and expense structure to continue to drive operating efficiency. Second, we must drive product competitiveness with innovative, high quality, appropriately priced products that address key growth areas. Third, we must leverage our success in China and the success of the dual transaction-relationship model in support of our products. I'm looking forward to building on the strong momentum Lenovo has delivered to date,” he added.

While the purchase of IBM’s PC unit undoubtedly elevated Lenovo to global brand status, the vendor’s future success will be heavily dependent on how quickly it can stamp the Lenovo identity onto the PC business. Senior Lenovo executives, reflecting on the recent results, have admitted that the vendor’s success in international markets will require more Lenovo style thinking and a little bit less of the old IBM ways.

Amelio himself has commented on the need to move away from the ‘legacy systems’ that the company inherited from IBM. Part of this strategy will involve the launch of new products focused at emerging markets and target customer segments. Expect to see Lenovo-branded notebooks coming out at different price points to ThinkPad-branded units during 2006.

Lenovo has the potential to change the pecking order in terms of the Middle East’s top notebook vendors. HP, Acer, Toshiba and the like will all be watching Lenovo closely. Lenovo has the low-cost manufacturing base, the economies of scale and the brand identity to become a major player. With distributors such as Almasa and Redington on board in the region, it is also building up a channel capable of reaching below the enterprise sector.

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