Sept. 10 (Bloomberg) -- Lenovo Group Ltd., Asia's biggest maker of personal computers, will sell laptops to consumers in the U.S. to challenge Hewlett-Packard Co. and Dell Inc.

The company will also sell the Lenovo-brand laptops to individuals in France, Russia and South Africa starting January, Chairman Yang Yuanqing said in an interview on Sept. 8 in Dalian, northeast China. Desktop computers will be sold to individuals in these countries from March or April, Yang said.

Lenovo lags behind Hewlett-Packard and Dell in the consumer market, which is growing three times as fast as corporate sales, IDC estimates. The company, which mostly sells to businesses outside its largest market China, is vying with Acer Inc. to buy Packard Bell NV and expand in Europe, its first purchase since acquiring International Business Machines Corp.'s PC unit in 2005.

``The consumer market will be the main driver in the next few years,'' Yang said. ``We have almost no consumer market overseas now, and hope to expand that to about the same as for China.''

In the U.S., the computers will likely be sold at Office Depot Inc. and Circuit City Stores Inc. outlets, said Yang, who also heads the consumer PC division set up in April.

Lenovo leads in China's market for desktop computers and notebooks with a 35.8 percent share, said Bryan Ma, an analyst at IDC. Hewlett-Packard is second with 13.4 percent, followed by Shanghai-based Founder Technology Group Corp. with 12 percent and Round Rock, Texas-based Dell with 8.1 percent.

Lenovo, which moved its headquarters to Raleigh, North Carolina, after the IBM purchase, began sales of its own-branded models to small- and medium-sized businesses in February 2006. As part of the acquisition, Lenovo is allowed to use the IBM brand name until 2010.

No Easy Task

``It's not an easy task going to the consumer markets , especially in the U.S., where the Lenovo brand isn't well known and consumers are more brand-conscious,'' said Charles Guo, an analyst at JPMorgan in Hong Kong. ``Lenovo has been trying to build brand awareness by sponsoring the Winter Olympics and NBA, but it will take a while.''

Guo rates the stock ``overweight'' with a target price of HK$6.20.

The company in October 2006 signed an agreement with the National Basketball Association to be its official PC partner, and was a sponsor of the Winter Olympic Games in Turin last year.

Beijing Olympics

Awareness of the Lenovo brand name will increase next year with the Beijing Olympic Games, for which the company is a main sponsor, Yang said. He declined to provide details for the advertising campaign for the consumer strategy.

Shares of Lenovo fell 3.9 percent to HK$5.13 at the close in Hong Kong, while the Hang Seng Index rose 0.1 percent. The stock jumped 62 percent this year, beating Hewlett-Packard's 19 percent advance and Dell's 8.3 percent gain.

Lenovo's sales from China, Taiwan and Hong Kong accounted for $1.5 billion, or 39 percent, of total revenue in the fiscal first quarter ended June 30. Revenue from the Americas was $1.1 billion, or about 29 percent.

The company already sells some Lenovo-brand notebooks and desktop computers to consumers in Southeast Asia and India.

Packard Bell

Lenovo on Aug. 8 said it had exclusive negotiating rights to purchase Wijchen, Netherlands-based Packard Bell, whose distribution network will help the Chinese company build its overseas consumer strategy.

Last week, Irvine, California-based Gateway Inc.'s directors accepted a $710 million takeover offer bid from Acer. Gateway has first rights to acquire Packard Bell, Taipei-based Acer said.

The purchase would allow it to overtake Lenovo, as well as exercise Gateway's rights to Packard Bell, Acer said.

``The first right of refusal is something we have known and are prepared for,'' Yang said. ``Of course the deal would give us a good foundation, but without it we are still very confident of our consumer strategy. Everything is going ahead as planned.''

Yang declined to say if Lenovo, which hasn't announced an offer price, is prepared to pay more to buy Packard Bell.

``Lenovo needs Packard Bell more than Acer,'' George Chu, an analyst at UBS AG in Shanghai, wrote in an Aug. 28 note. `We believe there is still a chance that Lenovo will acquire Packard Bell at a higher price.''

Packard Bell, which generated revenue of 1.5 billion euros ($2.1 billion) last year, may fetch $770 million, or 15 times estimated earnings, said Xin Zhao, an analyst at Cazenove Asia Ltd. in Hong Kong.

More Consolidation

``There will be further consolidation in the PC industry,'' Yang said. ``We are always open to any merger and acquisition opportunities,'' he said, declining to be more specific.

Dell, the second-largest computer maker worldwide, on Sept. 5 said it will sell systems in retail stores in its 10 biggest international markets to reach more consumers.

Hewlett-Packard announced plans the next day to accelerate expansion outside of major Chinese cities including Beijing and Shanghai. The Palo Alto, California-based company expects to be in 600 cities in the nation in 2008, rising from 430 currently.

``We will not tolerate our market share being snatched away by our competitors,'' Yang said. ``We don't just want to defend our share. We also want to increase it.''

To contact the reporter on this story: Janet Ong in Beijing jong3@bloomberg.net.

Last Updated: September 10, 2007 06:18 EDT