Channelnomics

Lenovo, on Buying Spree, Shows Ambitions - Channelnomics

Lenovo CEO Yang Yuanqing

Lenovo CEO Yang Yuanqing

Some vendors have busy years marked by product releases and re-organization efforts. Lenovo is having a busy week, and it’s likely not done. The net: Lenovo is revealing ambitions and accelerating progression toward goals to become a serious multi-technology contender.

Since the beginning of the week, here’s what has happened at Lenovo.

Lenovo shocked the market yesterday when it bought Google’s mobility unit — Motorola Mobility — for $2.9 billion, giving it a major foothold in the U.S. smartphone market. Lenovo is already a major handset player in Asia. Google is getting a pile of cash and retains the mobility patents, while Lenovo gets the handsets and customers.

Lenovo also bought IBM’s x86 server unit for $2.3 billion. While Lenovo already has servers in its portfolio, the addition of the IBM products and technology, which includes some networking gear and software, propels Lenovo from the “other” in server market share to top 5 contender.

Immediately after the IBM deal, Lenovo announced a major reorganization, dividing the company’s operations into four units: PC, Mobile, Enterprise, and Ecosystem and Cloud. The shuffle goes into effect April 1 and is the most telling reveal of where Lenovo is going, as it clearly is positioning itself to compete more directly with Hewlett-Packard Co., Dell Inc., Samsung Electronics Co., Apple Inc. and even IBM Corp.

And if that wasn’t enough, Lenovo announced two big product releases — four new ThinkServer models designed for enterprise environments and the ThinkPad 11e notebook, available as ruggedized or Yoga-flip model — intended for education customers.

And that was just the first three days of Lenovo’s week. In total, six new products hit the market and more than $5 billion was spent on new technologies.

The acquisitions still need to pass government review. U.S. regulators are likely to take a hard look at the server deal, as it shifts significant American assets to a Chinese company. The same will likely hold true for the Motorola Mobility deal (Motorola Solutions, the enterprise vendor, is not party to this transaction).

These deals and changes are hardly the first of Lenovo’s ambitions revealed. Over the past two years, Lenovo has been slowly and steadily diversifying its product portfolio to lessen dependence on PC sales, which continue to climb despite the overall market trending down. It has a joint-venture with EMC for storage and server development, it’s evolving its cloud strategy, and it’s already producing its own servers and storage equipment.

While Lenovo is the world’s largest PC vendor by shipments and sales, it’s not the behemoth that is HP, IBM, Samsung or Apple. In fact, it’s about one-third the size of Dell, yet it’s doing remarkably well amid severe market headwinds. Where other vendors are struggling to sustain PC sales, Lenovo is expanding its shipments and market share. And it’s betting it can use the same strategy of strong multi-channel sales and market to drive growth in its new lines.

“Lenovo has a proven track record of successfully embracing and strengthening great brands — as we did with IBM’s Think brand — and smoothly and efficiently integrating companies around-the-world.  I am confident we will be successful with this process, and that our companies will not only maintain our current momentum in the market, but also build a strong foundation for the future,” said Lenovo CEO Yang Yuanqing, of Motorola Mobility deal.

Thus far, analysts are pretty down on the server and mobility deals. Some analysts are questioning why Lenovo needed to buy IBM’s server unit, given that it’s doing well with its organic strategy. More analysts are concerned that Lenovo overpaid for Motorola Mobility, a unit that Google bought just two years ago for $12.5 billion; sales continue to fall and the real value is in the patents that Google is retaining.

Analysts can have their say, but Lenovo gets the last word. In 2007, just two years after paying $1.3 billion for the IBM ThinkPad unit, a deal that propelled the company on the global stage, Lenovo was being rewritten off. Sales were falling. Brand recognition was nonexistent. And distribution channels were failing. Lenovo took a risk of completely decoupling from IBM and walking its own path. A combination of marketing, channel development, competitive pricing and quality products made the difference.

Writing off Lenovo again or questioning its strategy is premature. The company as demonstrated a propensity for achieving goals it sets, while doing well by its partners and customers. The moves made this week are more evolutionary than revolutionary, and consistent with the upward drive for which Lenovo is becoming famous. Lenovo isn’t becoming a contender; it is a contender.

Related Articles:

Leave a Reply