It has been a little over ten years since a little-known computer manufacturer from China made a global statement by acquiring IBM's personal computing division. Lenovo is now the world's largest PC maker and has also made significant inroads into the smartphone. tablet and enterprise computing sectors in several regions. Now the company is at a crossroads, with the PC market stagnating and its other businesses yet to reach maturity.
While the company has continued to post strong PC sales, the management appears to have recognized that growth has to come from other areas in the future. "We are currently leveraging the consolidation of the industry. Some players are leaving and we are taking their market share," said Yang Yuanqing CEO of Lenovo Group.
Yuanqing identified the smart home, healthcare and personal assistants as areas the company was looking to expand into. "In the future, everything will be smart. We must constantly find new areas to innovate and develop. Smartphones and PCs are still good businesses to be in but we need to expand beyond them," he added.
While the Internet of Things could be crucial to Lenovo's long term of future, it is the enterprise and mobile devices divisions that are currently driving their diversification.
The company has posted a 15% increase in revenues from its non-PC businesses over the last two years, thanks in large part to two massive acquisitions. The $2.9b buyout of Motorola has established Lenovo as the 4th largest smartphone maker in the world and the takeover of IBM's server division has left it the 3rd largest player in the enterprise market.
However, in markets like India where computer penetration is still around 10%, the company believes there is still life left in PCs. "It's not just Lenovo, the whole industry has missed the bus on PCs in India, said Rahul Agarwal, Managing Director of Lenovo India. "The lower middle class has tended to prioritise other consumer durables over PCs. The industry as a whole has not been able to convince families that the PC is a good investment." According to Agarwal, education could be the crucial hook to drive PC penetration to 20%. "A large portion of the population is just beginning to taste the benefits of the Internet. If we can make PCs affordable, we believe the market can grow," he said.
While the company recently began manufacturing phones and tablets in India, it says there are hurdles to expanding local production of PCs. "For tablets and phones there is a huge advantage for manufacturing in India - a near 8% cost benefit. Which is why everybody has rushed into it. Whereas for PCs there isn't that kind of value yet," Agarwal added.
He indicated that the government needs to incentivize local production of PCs as they have done with mobile devices. "We want to be more aggressive in India. If a product is more expensive in India compared to the global cost, that is purely down to government duties."
This writer is in Las Vegas at the invitation of Lenovo India