Mumbai: Amar Babu, managing director of Lenovo India Pvt. Ltd, wants to ensure that his company’s ranking in India is sustained.
Last month, when technology research firms Gartner Inc. and International Data Corp. (IDC) released their March quarter figures for personal computers (PCs)—desktops and laptops—Lenovo Inc. was ranked India’s number one PC maker by both firms. Analysts, then, pointed out that the Chinese company had managed to overtake competitors Dell Inc. and Hewlett-Packard Co. (HP) due to part-execution of a large order of laptops that it had received from the Tamil Nadu government late last year.
“The key is that we protected our enterprise business and emerged a leader,” Babu said in an interview. “Now we plan to focus our attention on the consumer and small- and medium-sized business (SMB) segments.”
Currency fluctuation: Amar Babu, managing director of Lenovo India, says the rupee depreciation is affecting the company’s earnings adversely, especially in government contracts. Photo: Indranil Mukherjee/AFP
The Tamil Nadu government had announced procurement of 900,000 laptops at about Rs 14,000 a piece. Lenovo, along with HCL Infosystems Ltd and Acer Inc., had bagged the contract. Lenovo had emerged as the lowest bidder for providing laptops to the Tamil Nadu government, which is giving them away free as part of an election promise by chief minister J. Jayalalithaa.
“The partial execution of the Tamil Nadu government order helped Lenovo’s PC shipments grow 64% and reach the No. 1 position in the first quarter of 2012. HP’s PC shipment grew 21%, whereas Dell declined 11% compared with the first quarter of 2011,” noted the Gartner release, which pegged Lenovo’s marketshare in the March quarter at 14.9%, up from 9.7% in the year-ago quarter. Dell saw its share dip 2 percentage points to 14% while HP followed with 13.7%, up from 12.1% in year ago.
Amar Babu of Lenovo India talks about his company’s bumper sales in the March quarter, and its strategy for the coming months.
IDC said Lenovo overtook Dell and HP in the country with a 15.8% share in the March quarter.
“We became No. 1 in the March quarter. The key is how do we stay number one,” Babu said.
A bulk of the Tamil Nadu government order will be executed in the June and September quarters, he pointed out, adding, “So we will obviously grow fast in the coming quarters due to this order. Hence, we will have to build on the strategy to continue the momentum by orders from other states, too.”
To make a mark in the consumer segment, Lenovo India announced the launch of a range of all-in-one (AIO) PCs earlier on Tuesday.
“As a global personal technology company, we will continue to set new standards and delight consumers by delivering thin, light, efficient products. Ultrabooks and AIOs are industry game changers,” said Babu. He added Lenovo has around 1,000 stores in the country, which helps the company reach out to customers.
Consumer buying is important and accounted for 47% of total PC sales in the first quarter of 2012, which is down 3% from the fourth quarter of 2011, according to Vishal Tripathi, principal research analyst at Gartner.
Babu, however, admitted that rupee depreciation was affecting the company’s earnings, especially in government contracts. “There’s an exchange-rate valuation clause in government contracts, but it has never been used. As an industry, we are emphasizing that we need government deals to tide over such times when the economy is slowing. But since 90% of our cost is dollar-denominated, if the rupee depreciates by 10%, our costs go up by 9%. In government contracts, we do not make much margins, hence this is important when it comes to government contracts where we have to meet our commitments,” explained Babu, who added that in such cases (as with the Tamil Nadu order), “we have to absorb the hit on our earnings.”
Lenovo does not discuss India revenue figures. According to Dataquest Top 50 (2011), Lenovo India was ranked 22 with revenue of Rs 3,566 crore.
Babu said Lenovo will also focus on smartphones and tablets in the country, as it has done in China.
“We are looking at building a master brand of Lenovo, just as we did in China. In the PC+ era, as we call it, you will see us focus on four stages—tablets, smartphones, mobile PCs and smart televisions. In China, we have the brand and reach, and hence have all four segments since we have the scale. In India, we have a good brand and a reach which we created last year. We have a tablet PC, and are evaluating smartphones,” said Babu, who added that “we should be able to have our smartphone strategy for India ready by the end of fiscal 2013, and an aggressive tablet strategy in the coming months”.
Tripathi of Gartner believes that Lenovo is on the right track but needs to strengthen its consumer and SMB presence since they are “good in the enterprise space”. But he cautioned that “Lenovo has to take care of post-sales service. In the enterprise space, too, it is not using channels and selling directly to large companies. While this will help it earn better margins, post-sales service will also count a lot.”
As for smartphones, Tripathi said the “perception is that Lenovo is a good PC maker. That does not necessarily translate into good sales for smartphones”.