Lenovo’s rise amid giants defies critics

Lenovo’s rise amid giants defies critics

Updated: 2013-11-25 07:50

By Alfred Romann in Hong Kong ( China Daily)In the time that you take to read this, people around the world will have snapped up a Lenovocomputer, tablet or smartphone – about one of these electronic devices every four seconds orso.

Lenovo Group Ltd has defied the skeptics to prove that an Asian company, in this case aChinese personal computer maker, can emerge as a multinational player – not just as amanufacturer of products for other companies but as a truly global brand.

Lenovo now has the largest global market share of PCs and is in fourth place in the UnitedStates. It is also the fourth largest tablet company in the world behind Apple Inc, SamsungGroup and AsusTek Computer Inc. It is currently producing the type of mobile phones thatmake people salivate.

“You want to see a really, really nice phone? Look at Lenovo,” said an industry consultantduring a recent interview. It was an unprompted comment in the middle of a conversation aboutinnovation in China.

The Lenovo K900 is indeed a very sleek phone; nice to hold and easy to operate. Over thenext year or two, the company wants to introduce its phones in two dozen new markets.

Lenovo, the once lumbering enterprise known as Legend, has become a nimble global player.

Starting from a small business launched in 1984 by 10 scientists from the Chinese Academy ofSciences, Lenovo Group Ltd has expanded fast to acquire IBM’s PC business in May 2005.

Lenovo’s track record of partnerships with foreigncompanies had not previously been successful. A2002 drive to hire managers from Silicon Valley hadbeen a bust, with few of them lasting more than ayear. The IBM purchase was to have a happieroutcome.

In 2004, Lenovo had just 2 percent of themarket and was ranked ninth globally amongcomputer manufacturers. It had a marketcapitalization of about $3 billion.

After the IBM deal, Lenovo became the third-largest PC maker in the world, still well behindDell and Hewlett-Packard.

Some growing pains followed the acquisition but, thanks to a distinct governance structure, an ability tostraddle multiple cultures and a constant and company-wide drive to innovate, Lenovo took over the singlelargest share of the PC market in the world last month.

“We are not satisfied with that. We are looking forward to achieving more in the next three orfour years,” says Robert Li, executive director of supply chain for Asia-Pacific at Lenovo.

Lenovo has grown into a $34 billion company with products in 160 countries. Few other Asiancompanies have been able to navigate the global marketplace as successfully as Lenovo – andin such a competitive field.

The company follows a “protect and attack” strategy: Protecting its major market base in Chinato ensure it remains the most profitable for the company while attacking prospective customersin new and emerging markets such as those in Latin America.

It is also aggressively seeking new customers in countries that make up the Association ofSoutheast Asian Nations (ASEAN), where Lenovo is already a very strong player but is hopingfor rapid growth amid a growing middle class and the emergence, in 2015, of a more unifiedmarket.

Deals and acquisitions have been at the heart of Lenovo’s growth. In 2011, it entered into ajoint venture with Japan’s NEC Corp and German electronics firm Medion AG. In 2012, itentered into deals with Taiwan-based company Compal Electronics Inc, cloud computingprovider Stoneware and server company EMC Corp. This year, it acquired Brazilian electronicsfirm CCE Ltd.

Now the company is morphing again, from being a PC vendor to being what it calls a PC-Plusvendor – meaning selling not just personal computers, but other computer products such astablets and smartphones. For the first time in its history, the company sold more phones andtablets than PCs.

At the launch of their new high-end Yoga tablet in Los Angeles last month, Lenovo announcedUS actor Ashton Kutcher had joined the group as a product engineer. The tech-savvy star’srole is to help develop products to compete with Apple’s iPad tablet series.

Following Kutcher’s portrayal of Apple cofounder Steve Jobs in the recent movie Jobs,Lenovo’s celebrity hire will help boost brand awareness. It is a smart move in competing withthe industry giants.

“Lenovo not only remains the top PC company in theworld, but is also already the number four player inboth smartphones and tablets worldwide andcontinues growing rapidly,” said Yang Yuanqing,Lenovo’s chairman and CEO, on the release of thecompany’s third-quarter results.

Jenny Lai, an analyst at HSBC, attributed therapid rise in profits over the last quarter notto PCs, but to cost control and the company’ssmartphone business.

It would be unfair to call Lenovo a Chinacompany; today, it is an undisputed globalplayer. True, the company derives more of itsrevenues from China than from any otherregion, but not so much as to be the singledominant line in the revenue chart.

In the third quarter of this year, Lenovo earned $3.8 billion in China, $1.5 billion elsewhere inthe Asia-Pacific region, $2.3 billion in Europe, the Middle East and Africa, and $2.2 billion in theAmericas.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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