Lenovo losing out in western markets

Lenovo may be the third largest computer maker in the world, after it bought IBM's hardware business and it also is reporting a comfortable profit.

But the firm, which is one of the few Chinese outfits to invest in Western businesses, is not finding the going easy.

When Lenovo bought IBM's hardware division and its iconic Stinkpad brand of lappies for US$1.25 billion, Biggish Blue was not making any money out of the division. However, many analysts told us that armed with the name Thinkpad and a lot of support from its Asian markets, Lenovo could be a serious contender.

But now Lenovo is trying to flog the same gear under its own name, Western buyers who bought up Thinkpads for years, are suddenly having a crisis of brand recognition.

It seems Western consumers will buy Chinese goods, such as the iPod, just so long as they think it is made by a company which is registered in their home country.

The latest sales figures show that Lenovo is being ignored by buyers in the west and its profits are being propped up by its great performance on the Chinese market.

It seems to have mostly turned around IBM's loss-making division, but that is mainly by flogging its laptops in Beijing's streets.

Meanwhile, it is getting a good kicking from the likes of Dell and HP in Western markets, particularly the US.

According to the Washington Post, all this adds up to an eight percent reduction in Lenovo's profits on last year and things could get worse.

Analysts claim that Lenovo's standing in foreign markets could slip still further due as the Thinkpad fades from the goldfish-like memories of Western buyers.

If this is the case, Lenovo Chairman Yang Yuanqing's comments saying he expects it to take three years to return to strong profitability might be optimistic, when most saw him as being pessimistic. Analysts can't see the loss making US arm gaining any life until the middle of next year when there will be a heating up of sales when the corporates start buying new gear based around Vista.

But it may not be enough. Bean counter JP Morgan sees the market share loss is primarily due to lack of exposure in the fast-growing consumer market, while its core market segment of corporate market has remained stagnant. If Lenovo wants to go Western, it seems they will have to pull finger out and do some heavy marketing. µ

L'INQ
washingtonpost