Lenovo Plans New Line Of Consumer Notebooks, Desktops

The company says it will drop the IBM title from its ThinkPad notebooks two years earlier than planned.
Lenovo, best known outside of China for its ThinkPad business notebooks, plans to introduce next year a new line of consumer laptops and desktops to try to boost its global market share.

The launch, which is expected to start in January, would be timed to coincide with a worldwide promotion and branding effort connected to Lenovo's sponsorship of the 2008 Beijing Olympics, Ezra Gottheil, analyst for Technology Business Research, said in an e-mailed commentary distributed Thursday.

"Because Lenovo has been very successful in the Chinese consumer market, TBR believes the company will also have success globally, particularly in the more rapidly growing emerging markets," Gottheil said.

Emerging markets usually apply to China, Latin America, India, and other areas outside of North America and Western Europe.

Lenovo on Thursday confirmed that new consumer PCs were in the works, but declined to give details. "We are planning to launch new consumer products early next year, but are not yet ready to share further details," Lenovo spokesman Ray Gorman said in answering questions by e-mail.

Lenovo is strongest in its Chinese homeland, where it has a growing consumer presence. The company was ranked third in PC shipments worldwide in the third quarter with 8.2% of the market, according to IDC. Shipments for Lenovo grew nearly 23% from the same quarter a year ago, easily surpassing the 15.5% increase in overall PC shipments worldwide.

Nevertheless, Lenovo's market share is far behind industry leaders Hewlett-Packard and Dell, which accounted for 19.6% and 15.2% of the market, respectively. Lenovo apparently hopes to narrow the gap with consumer-focused PCs.

Lenovo late last month released its first consumer notebook for the U.S. market. The 14-inch L3000 Y410 starts at under $740 in some retail stores, depending on configuration. A base model includes a 1.46 GHz Pentium Dual Core T2310 processor, 1 Gbyte of memory, a 160-Gbyte hard drive, a dual-layer CD/DVD recordable drive, and Wi-Fi support. In addition, the PC has a 1.3 mega-pixel camera, Dolby Home Theater speakers with sub-woofer, and a 6-in-1 media card reader for importing digital pictures. The computer ships with Microsoft's Vista Home Premium operating system.

Despite making its first entry into the U.S. consumer market, Lenovo launched the product quietly without even a press release. Gorman said the L3000 Y410 was based upon existing product lines. "The products you see next year will be brand new," he said.

Meanwhile, Lenovo on Thursday reported a strong fiscal second quarter. For the three-month period ended Sept. 30, the company reported a net profit of $105.3 million, nearly tripling the $37.9 million in the same period a year ago. Revenue jumped 20% to $4.4 billion.

In releasing earnings, William J. Amelio, president and chief executive of Lenovo, said the company's performance over the last few quarters has given it the confidence to stand on its own and drop the IBM brand from its popular ThinkPad notebooks next year. "By making substantial progress on all of our critical priorities over the past few quarters, we're now a stronger healthier company," Amelio said in a statement. "One important sign of this progress is our decision to completely transition our Think products from the IBM brand to the Lenovo brand two years earlier than planned."

Lenovo had the rights to use the IBM brand until 2010. The company got the rights in 2005 when it purchased IBM's PC unit for $1.25 billion.

Despite the strong performance in the first fiscal quarter, Lenovo's operating margin was too low at 2.7%, particularly in a quarter where PC shipments worldwide were strong, TBR analyst Gottheil said.

"Lenovo is in the middle of a multi-year program to tune its supply chain and reduce costs, and it has already had success," Gottheil said. "This quarter's gross margin of 15.1% was the second-highest of the last nine quarters. TBR believes Lenovo will continue to improve efficiencies throughout CY (calendar year) 2008."

While reducing expenses, Lenovo will also have to deal with stiff competition from no. 4 Acer, which had 8.1% of the PC market in the third quarter. The Taiwanese company increased shipments by more than 59% from a year ago, helped by strong gains in its main markets in Europe, the Middle East and Africa, and the Asia-Pacific area.

In the first quarter of the year, market researcher iSuppli had Acer grabbing the no. 3 spot from Lenovo, before losing it later in the year.

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