April 4, 2007 1:28 PM PDT
Lenovo wants to be household name
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The company plans to increase its presence among consumers outside of its home country of China through the creation of a new business unit geared toward home users of technology, a representative confirmed Wednesday. The unit will be headed by Lenovo Chairman Yang Yuanqing until a more permanent replacement can be found.
Quite simply, Lenovo is looking for growth. The company is the third-largest PC company in the world, but it doesn't participate in some of the fastest-growing areas of the market, such as consumer notebooks. The ThinkPad business it acquired from IBM sells mainly to businesses, and the Lenovo 3000 line of desktop and notebook PCs are really meant more for small and medium-size businesses.
But consumer PC sales are growing strongly this year, especially in retail and especially among notebooks. And consumer electronics outside of the PC--things like printers, cameras and music players--remain a profitable area of business for companies like Samsung and LG Electronics.
One thing working in Lenovo's favor is that it's already familiar with the consumer business: it's the largest PC company in China, and it already sells a wide range of consumer electronics devices to Chinese consumers. The company has been spending more and more money trying to highlight its brand, building up to the 2008 Beijing Olympics, which analysts expect to serve as a worldwide coming-out party for Lenovo.
"Lenovo has very little brand recognition in the U.S.," said Samir Bhavnani, an analyst with Current Analysis. "If you're trying to build a consumer electronics brand, you have to sell into the U.S."
Companies such as Hewlett-Packard, Acer and Toshiba have been on the upswing based on the strength of retail PCs, while companies like Dell have suffered from a downturn in the corporate PC market. Lenovo is very dependent on the U.S. corporate market, but because it sells mostly notebooks to those customers, it wasn't as exposed as Dell, which had to deal with downturns in both U.S. corporate spending and desktop orders.
Moving into consumer PC sales is a natural evolution for Lenovo, which has taken baby steps into retail outlets with its 3000 series PCs at places like Office Depot, Circuit City and Best Buy for Business. Tackling consumer electronics could be a little harder, based on the track record of other PC companies, said Stephen Baker, an analyst with NPD Group.
"We really haven't seen anybody who has been a rousing success in leveraging consumer electronics," Baker said. HP has had a decent run of selling digital televisions and cameras--and is perhaps best-known for its printers. But Dell and Gateway have not had as much success breaking into the traditional consumer electronics market.
Still, Lenovo is unique compared with its PC competitors in the U.S., Baker said. "They've been doing both of these things (consumer electronics and PCs) on a historical basis, where we've seen other companies just say, 'this looks like a good opportunity, let's jump into consumer electronics.'"
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