Lenovo Bets Convertible Tablet Can Win Share From Apple

Lenovo Group Ltd. (992) is betting on four Windows-based notebook-tablet convertible devices to win market share from Apple Inc. (AAPL) and Samsung Electronics Co., even as sales in the product segment decline.

The IdeaPad Yoga is a multimode notebook available in two versions with 11.6- or 13.3-inch touch screens that let users flip and fold the keyboard to convert the device to a tablet, said Peter Hortensius, president of Lenovo’s product group. The larger device goes on sale in the U.S. on Oct. 26, followed by the smaller one in December, he said.

Chief Executive Officer Yang Yuanqing has set his sights on dominating in mobile devices such as smartphones and tablets that are eating into personal-computer sales, he said in August. Lenovo is close to overtaking leader Hewlett-Packard Co. (HPQ) in global PC shipments, with its second-quarter market share rising to 14.7 percent, almost matching the U.S. company’s 14.9 percent, according to Gartner Inc.

“We view these products as a key part of gaining share,” Hortensius said of the convertible tablets in a telephone interview yesterday. “The real key to growth is providing useful products for customers, and we think these fit that category very well.”

Sales of all convertible tablets based on Microsoft Corp. (MSFT)’s Windows fell to 150,000 in the second quarter from 170,000 three months earlier, and more than 200,000 in every quarter of 2011, said Jay Chou, a senior research analyst at IDC. That’s less than 1 percent of total PC shipments, he said.

Apple shipped about 17 million tablets in the second quarter, Chou said.

‘Underpowered Laptop’

Dennis Lam, a Hong Kong-based analyst at DBS Vickers, said he’s not convinced convertible tablets will make sense for most users.

“At the end, you end up with an underpowered laptop, and a not-so-portable tablet hybrid,” Lam said in an e-mail yesterday. “If I wanted the convenience, I would stick with a tablet. If I wanted to do work with spreadsheet, I would stick with an ultrabook. The added option of tablet plus keyboard completely defeats the purpose of a tablet in the first place.”

Lenovo fell 0.8 percent to close at HK$6.17 in Hong Kong trading,the lowest level since Sept. 12. The shares have gained 19 percent this year, compared with a 13 percent advance for the benchmark Hang Seng Index.

New Windows

IDC’s Chou said the new version of Windows for touch computers will be a catalyst, and Lenovo has found part of the market that it can address.

Both versions of Yoga and two other convertibles, the IdeaTab Lynx and the ThinkPad Twist, run Microsoft’s new Windows 8/RT operating system for mobile devices, Lenovo’s Hortensius said.

Yoga’s convertibility derives from a 360-degree, dual-hinge flip design, Lenovo said when announcing the device in January. The 13.3-inch version is powered by an Intel Corp. Core processor and carries a suggested retail price of $1,099, Hortensius said.

Lenovo still trails Apple and Samsung by a wide margin in the race for tablet users. In the second quarter, Lenovo was sixth in global tablet market share, with 1.4 percent, behind market leaders Apple, with 65 percent, and Samsung (005930), with 9 percent, according to researcher IDC.

“Tablets are a must-do and the U.S. market is an important market” for the devices, Vincent Chen, an analyst at Yuanta Securities Co. in Taipei, said in an e-mail yesterday. “I’m just not sure if Lenovo can see quick success.”

Hortensius said Lenovo expects to sell “quite a few” of the devices over the next year. He declined to provide a unit sales forecast.

“We’re pretty bullish on the outlook for convertibles,” Hortensius said. “In the marketplace you see a lot of users of tablets, and a lot of users of clamshell notebooks. People still buy a lot of both kinds of products. We see a lot of room for products that allow you to do both.”

To contact Bloomberg News staff for this story: Edmond Lococo in Beijing at elococo@bloomberg.net

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net

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