The Economist details the rise of Chinese computer giant Lenovo, from its humble start in a guard shack to the growing pains that followed its 2005 acquisition of IBM’s corporate PC division:
Given all this, its recent success is startling. In the third quarter of last year, Gartner, a consultancy, declared Lenovo the world’s biggest seller of PCs, ahead of Hewlett-Packard (HP). Even if HP briefly recaptures the lead in the fourth quarter, the trend seems clear: Lenovo is on a roll (see chart 1). It is number one in five of the seven biggest PC markets, including Japan and Germany. Its mobile division is poised to leapfrog Samsung to grab the top spot in China, the world’s biggest smartphone market. This week it made a splash at the International Consumer Electronics Show in Las Vegas with what PC World called “bullish bravado and a seemingly bottomless trunk” of enticing new products.
Lenovo’s rebound raises several questions. How did the firm recover from disaster? Is its new strategy sustainable? And does its rise signal the emergence of China’s first world-class brand?
Lenovo’s recovery owes much to a risky strategy, dubbed “Protect and Attack”, embraced by the firm’s current boss. After taking over in 2009, Yang Yuanqing moved swiftly. Keen to trim the bloat he inherited from IBM, Mr Yang cut a tenth of the workforce. He then acted to protect its two huge profit centres—corporate PC sales and the China market—even as he attacked new markets with new products.
When Lenovo bought IBM’s corporate PC business, it was rumoured to be a money-loser. Some whispered that Chinese ineptitude would sink IBM’s well-regarded Think PC brand. Not so: shipments have doubled since the deal, and operating margins are thought to be above 5%.
Gartner announced on Monday that HP had edged back ahead of Lenovo for the top spot in PC shipments during the fourth quarter of 2012, though Lenovo posted the strongest shipment growth.