By buying IBM's (IBM) personal computer business three years ago, Lenovo vaulted from the No. 8 position among PC makers to become the world's third-biggest. Now Lenovo is taking a second bold step that will determine whether it can stay in the top ranks for the long haul. On Jan. 3, the eve of the International Consumer Electronics Show in Las Vegas, Lenovo announced that it's expanding from its focus on business users to target the consumer market on a global basis.
The Chinese-American company announced six products, three laptops and three desktop models, that will be launched in multiple countries including the U.S., China, France, Russia, India, Australia, and Indonesia. Until now, most of Lenovo's efforts in the consumer arena have focused on China. Elsewhere, the company is best known for its ThinkPad business laptops. "This move is very important in the long run for us to meet our global aspirations," says Deepak Advani, the company's chief marketing officer. "The ThinkPad is the gold standard in business notebooks, and it does help build the global brand, but with the consumer strategy we can turbocharge it."
Acer's PC Challenge
In addition to competing with well-known brands such as market leaders Hewlett-Packard (HPQ) and Dell (DELL), Lenovo will face a stiff challenge from Acer. The aggressive Taiwanese company has been growing fast and recently purchased Gateway, a move expected to push it past Lenovo in the global rankings, at least temporarily. In the third quarter of 2007, Lenovo's share of global PC shipments came to 8.2%, edging Acer's 8.1% market share.
While Acer competes heavily on price, Lenovo is attempting to establish a reputation as a high-quality brand, accentuating innovative design with the new consumer machines. "We want to position our brand as the best engineered products for consumers," says Craig Merrigan, Lenovo's vice-president for consumer marketing.
Among Lenovo's new models, two stand out. The IdeaPad U110 is a 2.3-pound laptop with a bright red top and a high-sheen, 11-inch screen that runs right to the edge of the lid. The U110 features a vine-like texture on the surface of its metal cover. Prices will range from $1,200 to $2,000, depending on the configuration. The IdeaPad Y710 is geared toward video gamers. The keyboard features a set of special keys for game controls and an overclocking switch to provide extra processing power for fast-moving graphics. Prices for this machine start at $1,200.
All six machines also offer facial recognition-based security: When you boot up, photographic software studies your face through a built-in camera above the screen, confirming your identity before it lets you start using the machine.
Lenovo is emphasizing online sales, which are growing faster than traditional retail purchases and are more profitable for PC makers. In the U.S., the machines initially will be sold online and in stores by Micro Center Online, Office Depot (ODP), and TigerDirect; and online only by Best Buy (BBY) and Newegg. Still, Lenovo plans on expanding the number of traditional retail outlets it sells through.
Analysts briefed on Lenovo's plans give the company a thumbs-up on strategy. "This is a big step," says Roger Kay, president of market researcher Endpoint Technologies Associates. "If you're not a player in consumer these days, you're not a player." Competition is fierce, though. HP has been growing rapidly, taking advantage of its dominant position in retail. Satjiv Chahil, HP's senior vice-president for global design, doesn't think much of Lenovo's entry into the retail market. "They've been spending a lot of money on it," he says.
The investment may be paying off. The early reviews of Lenovo's consumer products have been positive. J.P. Gownder, a principal analyst at Forrester Research (FORR), likes the screen design on the notebooks and a uniquely shaped hinge where the laptop lid meets the body. When Gownder and others criticized the machines at a briefing last June, Lenovo scrambled to revise some of its designs, toning down some of the colors and textures. Still, Yao Yingjia, executive director of the Lenovo Innovation Design Center in Beijing, whose team designed the new PCs, says he wanted to make bold statements. "You have to take some risks," he says.