Lenovo Sees PC Slowdown as Reason to Sell Smartphones

Milko Van Duijl, president for the Asia-Pacific and Latin America regions at Lenovo Group Ltd., says the company will not develop its own operating system for its mobile devices.

Lenovo Group Ltd. (992) said slowing demand in the personal-computer market, where it overtook Hewlett-Packard Co. (HPQ) as the global leader last quarter, is good reason for the company to expand into smartphones.

Lenovo is already the second-largest smartphone maker in China and plans to seize the top spot from Samsung Electronics Co., Milko Van Duijl, president for the Asia-Pacific and Latin America regions, said in Hong Kong today. “Our goal is definitely to get to number one and not only to take smartphones into the China market but also into emerging markets.”

The company, founded in China in 1984 with the equivalent of $25,000, has expanded its market value to $8.4 billion, helped by takeovers including International Business Machines Corp.’s PC unit in 2005. Van Duijl said Lenovo just began selling handsets in Indonesia and India will follow, as Chief Executive Officer Yang Yuanqing moves closer to his goal of extending its PC dominance to smartphones and tablet computers.

“Despite the challenges in the global PC market, Lenovo continues to expand in both emerging markets and mature markets at the expense of its competitors,” Miles Xie, a Hong Kong- based analyst with Bocom International Holdings Co., wrote in a report today. Lenovo’s efforts are allowing the company to “rapidly expand its market share in the China smartphone market,” wrote Xie, who has a buy rating on the shares.

Lenovo, whose headquarters are in Beijing and Morrisville, North Carolina, closed at HK$6.33 in Hong Kong trading, unchanged from yesterday. The Hang Seng Index rose 0.5 percent.

Definite Easing

“There is definitely a slowdown in the market in all parts of the world, however, we are so strong in China that was a good reason for us to expand into smartphones,” Van Duijl said of the PC market in an interview with Bloomberg Television.

In China, Lenovo has a smartphone market share of 11.5 percent, surpassing that for the iPhone, Van Duijl said, without giving a figure for the Apple Inc. (AAPL) device.

As Lenovo expands in mobile devices, the company will build its own cloud-computing services and online store to create an ecosystem for the products, he said. Lenovo won’t make its own mobile operating system and will stick with Google Inc.’s Android and Microsoft Corp.’s Windows 8, Van Duijl said.

Worldwide PC shipments fell 8.3 percent from a year earlier to 87.5 million in the third quarter, according to Stamford, Connecticut-based Gartner Inc.

Photographer: Daniel Acker/Bloomberg

Lenovo Group Ltd. IdeaPad computers on display during the 2012 International Consumer Electronics Show in Las Vegas. Close

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Photographer: Daniel Acker/Bloomberg

Lenovo Group Ltd. IdeaPad computers on display during the 2012 International Consumer Electronics Show in Las Vegas.

Temporary Slowdown

Lenovo sees the PC market slowdown as temporary, Van Duijl said. Global PC shipments will rise to 530 million units within two to three years, from 350 million units now, he said.

Lenovo accounted for 15.7 percent of global PC shipments last quarter, overtaking Hewlett-Packard, with 15.5 percent, for the first time, Gartner said Oct. 10.

The Chinese company narrowed Hewlett-Packard’s lead in the quarter with a market share of 15.7 percent, compared with 15.9 percent for the Palo Alto, California-based maker, according to IDC, another market researcher. IDC’s study included so-called workstations, the more powerful desktop devices used for such tasks as engineering, architecture and video-game development.

CEO Yang said Lenovo will take steps to become the “clear leader” in PCs and leverage that dominance to head the market for mobile devices in what he called the “PC-plus era.”

“Becoming the clear leader in global PC share of course remains one of Lenovo’s aspirations, but it also only represents one more milestone in our journey as a company and our mission to become the leader in the PC+ era,” Yang said in e-mail on Oct. 11. “This includes PCs, tablets, smartphones, smart TVs, cloud and enterprise computing.”

Lenovo is still at least two years away from making “meaningful inroads” in mobile devices in the U.S. or Europe, said Jean-Louis Lafayeedney, an analyst at JI Asia in Hong Kong.

“Undoubtedly, Lenovo’s market share gains against competitors has been impressive” in PCs, Lafayeedney said in an e-mail. “In terms of tablets and smartphones, the company has yet to prove it can extend its reach beyond China and some periphery countries.”

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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