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Amar Babu, chief operating officer, Lenovo Asia-Pacific. Photo: Hindustan Times
Amar Babu, chief operating officer, Lenovo Asia-Pacific. Photo: Hindustan Times

Lenovo bets on consumer business in India

In India, Lenovo's smartphone market share increased from 0.6% in the March quarter of 2014 to 4.7% in the December quarter of the same year

China-headquartered Lenovo Corp. is sharpening its focus on becoming a more consumer-oriented company.

The company, which now sells smartphones, personal computers—desktops and laptops—and wearables for consumers along with servers and analytics solutions for businesses, “aims to gain a larger piece of the smartphone market in India and globally with Motorola coming on board", said Amar Babu, now the chief operating officer of Lenovo Asia-Pacific and chairman of Lenovo India, in an interview last week.

“Phones are selling well. Eight years back, 75% of our revenue came from B2B (business to business) and 25% from consumers (PCs). Today, the ratio is almost the other way around even without including Motorala," Babu said, adding, “As an organization, it’s a big transformation."

Lenovo closed financial year 2014-15 with $46.3 billion in revenue, of which 65% was from PCs, 25% from smartphones and tablets and 10% was System x (servers).

Lenovo does not provide country-specific revenue numbers. However, according to Dataquest, a Cyber Media India Ltd publication, the firm’s revenue in India stood at 5,740 crore for financial year 2013-14.

Lenovo acquired both its PC and server units from International Business Machines Corp (IBM) in 2004 and 2014, respectively. It also acquired Motorola Mobility from Google Inc. last year, becoming the third-largest smartphone manufacturer globally.

In India, Lenovo’s smartphone shipment market share increased from 0.6% in the January-March quarter of 2014 to 4.7% in the October-December quarter of the same year (primarily due to the acquisition of Motorola), according to data from Counterpoint Research.

It rose to 5.2% in the January-March quarter of 2015, becoming the fifth largest smartphone maker in the country. However, Samsung India Electronics Pvt. Ltd is a clear leader with a 27.8% market share, followed by Micromax Informatics Ltd’s 15.3% and Intex Technologies (India) Ltd’s 9.4%.

Lenovo has also tweaked its brand to make it “more digital- and millennial-friendly". The new digital logo comes in “various colours and backgrounds", Babu said.

Lenovo has also relaxed the dress code for more than half its employees—those working in the consumer segments. And it is also “adapting well to the online route" of selling products.

“One of the things we realized was that two to three years ago the only way to distribute phones was through the large offline store. There was no bundling with telcos, so we had been slowly building it (the distribution network), but online has given us that immediate scale. Now the combination of the two is working extremely well," Babu said.

Babu also expects the PC business to remain robust with “first-time buyers coming back" and the company is also looking to bolster its position in the server business. For the calendar year 2014, Lenovo was the third largest PC vendor in India with 15.8% market share. The top two PC makers included Hewlett-Packard Co. (HP) with 25.6% market share and Dell Inc. with 22.1% market share.

“System x was on the block for some time, after we announced the acquisition (in January 2014). It took us almost nine months to integrate and get clearance for the market. The market share actually dipped, obviously the competition moved up. Now, we have completed the integration of IBM’s System x. We expect the sever business to break even this financial year with the aim of achieving $5 billion in revenues (globally), a 20% growth," Babu said. “The bigger ambition is to become number one in five years (in the server business)," he added.

Analysts agree that Lenovo has enough muscle to grab a larger market share in the consumer segments.

“The company has been aggressively going after the consumer segment since the past two to three years. It reflects in the way the company has been reinforcing its branding and investing in expanding the distribution network. It now has about 1,200 to 1,500 branded stores across the country," said Jaideep Mehta, managing director of India and South Asia at research and advisory firm International Data Corporation (IDC).

“The strategy is also reflected in its product portfolio. Now that the company has the scale for smart connected devices—PC, tablet, smartphones and smart watches—it has enough muscle to capture more market share," he added.

According to Mehta, though Lenovo was a late entrant to the PC market, and had “formidable opponents including HP and Dell", it became very successful within a decade.

“The situation is the same with smartphones," Mehta said. He pointed out that while Lenovo gets all the benefits including low-cost manufacturing that the other Chinese companies have, “it will be able to do well even in hyper-competitive markets" because of its “mindset and attitude".

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