Workhorse Lenovo Group has risen to the top of the worldwide PC market, ahead of #2 HP and #3 Dell. The China-based group is a global supplier of Think-branded commercial PCs and Idea-branded consumer PCs, holding a dominant position in China. The company makes tablets, smartphones, laptops, desktops, workstations, servers, software, and accessories, and it is developing and launching mini ultrabooks and ideapads. Lenovo offers services for enterprise, small business, and home office markets. Certain products and services are geared specifically at the growing education, government, and health care verticals. Lenovo formed out of the acquisition of IBM's Personal Computing division in 2005.
Hong Kong-based Lenovo serves customers in more than 160 countries. The company generates more than 40% of its sales in China, where it holds more than 30% market share in PCs. Elsewhere, it generates about 20% of its sales in both Europe, the Middle East and Africa, and in the Asia-Pacific and Latin America regions. Lenovo is also increasing sales in other emerging markets.
Lenovo has operations in more than 60 countries across the globe. It has operations hubs in Beijing, Paris, and North Carolina, and a marketing hub in Bangalore, India. It also has major research centers in Yokohama, Japan, and in China in Beijing, Shanghai, and Shenzhen. Aiming to boost sales growth, Lenovo in 2013 began producing PCs in Raleigh, North Carolina at a new assembly plant. As part of this effort, the company is devoting more investment dollars to domestic manufacturing.
Lenovo's sales jumped 15% in fiscal 2013 (ended March) versus the prior year, to an all-time high of $33.9 billion. Indeed, the company's sales have more than doubled over the past four years, while profits have risen steadily. Driving the strong performance in fiscal 2013 was a 7% year-over-year increase in notebook computer sales, and a 6% jump in sales of desktop computers. Sales of mobile Internet and digital home products more than doubled to $3.1 billion, driven largely by brisk smartphone sales in China. The company saw growth in all of its geographic markets, with China, and Europe the Middle East and Africa posting the strongest results. Buoyed by rising sales, net income rose 33% to $631.3 million.
Lenovo has invested heavily in acquisitions and infrastructure over the past several years to bolster its PC business, with stellar results. Between 2011 and 2013 Lenovo jumped from being the world's fourth-largest PC vendor to the largest, surpassing HP in worldwide PC shipments and market share in the second quarter of 2013. More impressively, while the global PC industry is in a slump (down 5.6% in 2013), Lenovo is the only PC vendor that is growing. Indeed, Lenovo shipped almost 54 million PCs in 2013, up slightly from just over 52 million in 2012. Dell and HP both posted declines in shipments in 2013. With demand for PCs declining worldwide, Lenovo has diversified into smartphones, tablets, and other mobile devices, as well as into the enterprise sector, such as servers.
In addition to being the #1 PC company in the world, Lenovo is also the top PC company for large enterprises and the public sector. Lenovo used a different growth strategy than most of its big competitors to reach this market spot, expanding East to West. New products are introduced in China, then spread across the globe.
Although it has long been the leader in China, Lenovo does not rest on its laurels when it comes to increasing additional share in the Asia/Pacific region. To maintain supremacy in this market, Lenovo's Hefei, China-based joint venture with Compal Electronics began mass producing notebooks in 2013. Lenovo, which holds a 51% stake, and Compal, which owns the remaining 49%, will invest a total of $300 million in the JV's expansion.
In Japan, Lenovo leverages the strength of that country's #1 PC company, NEC, through a joint venture called NEC Lenovo Japan Group. That JV, of which Lenovo holds a majority stake, is the dominant PC maker in Japan, with about a 25% share of the market. Prior to the JV's formation in 2011, NEC had been the market leader in Japan but was not turning a profit when it made the deal. The JV helps give NEC access to cheaper Chinese supplies and manufacturing.
Mergers and Acquisitions
In the last two years Lenovo has made acquisitions to beef up its hardware offerings and support expansion in select markets. In January 2014 it agreed to pay more than $5 billion to acquire two new major product lines. First it announced plans to buy IBM's low-end x86 server business for $2.3 billion. The business includes System x, BladeCenter, and Flex System blade servers and switches, x86-based Flex integrated systems, NeXtScale and iDataPlex servers and associated software, blade networking, and customer service operations. The 7,500 employees who work for IBM are expected to be transferred to Lenovo. The acquisition frees up IBM to focus on its cloud computing business.
A few weeks later it agreed to pay $2.9 billion for Motorola Mobility. Google bought Motorola's smartphone business in 2012 with big plans for its Android phones. However, the division continued to suffer losses in the highly competitive smartphone market, and Motorola Mobility was forced to cut staff and close locations. As part of the deal, Lenovo will own the brands Moto X, Moto G, and the DROID Ultra series, while Google will own the patent portfolio.
In 2012 the company acquired US-based Stoneware to expand its secure cloud computing portfolio. The deal add new technologies and added capabilities for both commercial and consumer cloud offerings, particularly the ability to provide secure content across multiple devices in education and government. Also in September of that year Lenovo made strides in Latin America by acquiring Brazil's CCE, a regional leader in PCs and consumer electronics. It added manufacturing facilities; an extensive selection of consumer products such as PCs, tablets, smartphones, and televisions; and a robust supply chain.
Across the Atlantic, Lenovo's growth in Europe was supported by a majority stake acquisition in mid-2011 of Germany-based computer and electronics reseller MEDION. The MEDION buy doubled Lenovo's market share in Germany and made it the third-largest PC company in Europe's largest PC market.