::::As rivals falter, Lenovo has emerging market edge::::

<div class=&quot;custm_img_blk&quot;><img src=&quot;http://www.techgig.com/files/photo_1337883200_temp.jpg&quot; border=&quot;0&quot; width=&quot;300&quot; height=&quot;200&quot; align=&quot;left&quot; /></div><p>With home turf advantage in the world's biggest computer market and a foothold in major emerging economies, China's Lenovo Group (<span>0992.HK</span>) is looking to turn market share into profit, heaping more pressure on U.S. rivals Hewlett-Packard Co (<span>HPQ.N</span>) and Dell Inc (<span>DELL.O</span>).</p><p style=&quot;margin: 0px 0px 10px; padding: 0px&quot;>Concern that global tech spending, particularly in the developed world, is weakening faster than expected has battered Dell shares and prompted HP to axe some 27,000 jobs. To counter weakness in consumer spending in major cities in the world's second-largest economy, Lenovo is Casting its net wider.</p><p style=&quot;margin: 0px 0px 10px; padding: 0px&quot;>&quot;We are seeing strong growth in smaller Chinese cities,&quot; Chairman and CEO Yang Yuanqing said this week, unveiling a 59 percent jump in quarterly net profit. He noted that personal computer penetration in China is still just 20-30 percent versus 99 percent in the United States.</p><p style=&quot;margin: 0px 0px 10px; padding: 0px&quot;>China has been Lenovo's traditional stronghold, contributing 42 percent of group revenue and boasting the business's highest operating margins. Lenovo has around a 30 percent share of the Chinese PC market, well ahead of Acer (<span>2353.TW</span>), Dell, Asustek (<span>2357.TW</span>) and HP, all with single-digit market share, according to data from research firm IDC.</p><p style=&quot;margin: 0px 0px 10px; padding: 0px&quot;>Lenovo sold 2.5 million PCs in China in January-March, according to IDC, and company data showed the average selling price across its products rose 1.5 percent from the previous quarter to $545. In the fast growing tablet segment, its Lepad trails some way behind Apple Inc's (<span>AAPL.O</span>) iPad, but outsells Samsung Electronics' (<span>005930.KS</span>) Galaxy Tab.</p><p style=&quot;margin: 0px 0px 10px; padding: 0px&quot;>GRAPHIC: Global PC shipments&nbsp;<span style=&quot;cursor: pointer&quot;>r.reuters.com/deh48s</span></p><p style=&quot;margin: 0px 0px 10px; padding: 0px&quot;>Analysts note that while Dell has focused on high-margin products, Lenovo has aimed for volume sales to gain market share. The key for Lenovo, which has risen to the world's No.2 PC maker after its 2005 acquisition of IBM's (<span>IBM.N</span>) PC business, is how to turn that market share into profit.</p><p style=&quot;margin: 0px 0px 10px; padding: 0px&quot;>In the year to end-March, Lenovo's operating margin was below 2 percent - though it was 4.5 percent in China - compared to more than 7 percent at Dell and HP. Yang said Lenovo would look to turn a profit in emerging markets once it hits a certain volume - or 10 percent market share. This would allow it to hook in customers and profit later when they upgrade their products, particularly corporate clients, analysts said.</p><p style=&quot;margin: 0px 0px 10px; padding: 0px&quot;>After quarterly profit fell sharply at both HP and Dell, investors are asking questions about their product strategies and management focus in a weak global economy.</p><p style=&quot;margin: 0px 0px 10px; padding: 0px&quot;>Sunny Chung, Allianz Global Investors Taiwan Domestic Equity head, said a slowdown would cause some build-up in PC inventory as there would be more uncertainty over demand later this year. Allianz Global Investors owns Lenovo shares.</p><p style=&quot;margin: 0px 0px 10px; padding: 0px&quot;>Lenovo lags HP by 4-5 percentage points as global PC market leader, but analysts expect the Chinese firm to take the top slot this year or next.</p><p style=&quot;margin: 0px 0px 10px; padding: 0px&quot;>Lenovo has unveiled a series of consumer products in China as it moves aggressively into smartphones, tablet PCs and smart TVs, though some analysts question whether all its products will have the same level of success it has had in PCs.</p><p style=&quot;margin: 0px 0px 10px; padding: 0px&quot;>&quot;Lenovo's strategy in China is to continue building its own ecosystem, such as notebook, desktop, tablet, smartphone and TV. This could be kind of a dream as it's not easy to generate large profits from building hardware,&quot; said Angela Hsiang, an analyst with KGI Securities in Taipei.</p><p style=&quot;margin: 0px 0px 10px; padding: 0px&quot;>BUYING MARKET SHARE</p><p style=&quot;margin: 0px 0px 10px; padding: 0px&quot;>Lenovo has been winning market share in other emerging markets, such as Russia and India, where it is the top vendor, but that has been at the expense of operating losses due to aggressive pricing.</p><p style=&quot;margin: 0px 0px 10px; padding: 0px&quot;>Yang said his company's focus over the coming quarters would be to improve profitability in these markets by increasing volume sales and controlling costs in areas such as hard disk drives. In mature markets, which generate more than 40 percent of Lenovo's revenue, the company has taken market share more by acquisition.</p><p style=&quot;margin: 0px 0px 10px; padding: 0px&quot;>Last year it bought Medion in a deal that valued the German consumer electronics retailer at around $900 million, and signed a joint venture with NEC Corp (<span>6701.T</span>) to sell laptops in Japan.</p><p style=&quot;margin: 0px 0px 10px; padding: 0px&quot;>Chief Financial Officer Wong Wai Ming says Lenovo is open to more acquisitions.</p>

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