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
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
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
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.