Lenovo's buying spree may make it the hardware vendor to beat

Thanks to Lenovo's recent acquisitions, the company has a more interesting mobile offering and can deliver the servers that power most business functions.


Lenovo Vibe Z smartphone
Image: Jessica Dolcourt/CNET

In little more than a decade, Lenovo has gone from a relatively unknown Chinese hardware manufacturer to a global powerhouse in personal computing to recently launching a new chapter in what's already a storied history. Lenovo announced in January 2014 that it was acquiring IBM's entry-level server business, and not long after announced its intent to acquire Google's mobile handset business, which was acquired from Motorola less than two years ago.

Many pundits have cited commodity pricing and declining revenues as signs that the hardware business is dying, yet Lenovo seems to be doubling down. I'll explore what's behind Lenovo's strategy, and what it means for IT leaders.

End-to-end mobile growth

Lenovo is not the first company to attempt to offer hardware that covers all aspects of a mobile computing environment, including smartphones and tablets, traditional PCs, and the servers that power them -- and recent newsmaker Dell seems to be an obvious point of comparison. Unlike Dell, Lenovo is a "native" Chinese company, and the Chinese market will likely drive mobile device sales in the coming years. While PC and laptop sales remain stagnant, the Chinese market is beginning to rapidly adopt smartphones and tablets.

Apple and Android are relatively entrenched in the U.S. and Europe, but China currently has no clear winner in the race for smartphone dominance. Lenovo has a good position in the Chinese market without the former Motorola, but acquiring the remains of the company from Google provides high-quality designs and access to Google's in-house innovations. Fly that combination under the banner of a Chinese company to mitigate some of the NSA fallout, and you've got a winning combination.

Powering mobile devices in China

It may be less visible than the latest smartphone or tablet, but the adoption of mobile devices has created a massive demand for data center capacity, much of it powered by low- and mid-range x86-based servers. While demand for these boxes is stagnant in the U.S. and Europe, many of the same assumptions about mobile devices apply here. If Lenovo can drive down costs in the x86 market as it did with traditional PCs and leverage its access to the Chinese market, it will do well. 

Furthermore, Lenovo is the only non-U.S. PC manufacturer in the top three. With U.S. technology being called into question after the NSA scandals, and Lenovo's positioning in developing markets, it will likely take the x86 server business places IBM could not.

Should Lenovo be in your future?

If you already have a relationship with Lenovo, these two acquisitions represent good news. The company now has a more interesting mobile offering and can deliver the servers that power most business functions. If you're not a Lenovo customer, these acquisitions will likely shake up the major players in the industry and allow you to negotiate better deals with your existing customers.

Aside from Dell, which has never been able to produce a compelling smartphone and has had limited success on the tablet front, there is no other company that can legitimately claim to cover the end user and data center hardware space. A few years of disarray at Lenovo are to be expected, but if the company can successfully integrate compelling mobile devices and data center offerings into its portfolio, it could be the hardware vendor to beat.

Disclaimer: I am currently employed by IBM; however, I do not work in the hardware business, and I have no insider knowledge of x86 business being sold to Lenovo. All of my postings on TechRepublic are my personal opinions and commentary and don't represent IBM's positions, strategies, or opinions.

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By Patrick Gray

Patrick Gray works for a leading global professional services firm, where he helps companies rapidly invent and launch new businesses. He is the author of Breakthrough IT: Supercharging Organizational Value through Technology as well as the companio...