BackLenovo to focus on smartphones, tablets to offset falling PC sales
The company plans to increase investment, double its stores in India by March 2014, mostly in tier-3 cities
Premium(Reuters)
Bangalore: Lenovo Group Ltd, the world’s largest maker of personal computers, plans to increase investments in tablets and smartphones to offset weaker demand for PCs in India.
It also plans to nearly double the number of stores it has in the country to 2,000 by end March, Amar Babu, managing director of Lenovo in India, said in an interview, adding that the Beijing-based company, which overtook Hewlett-Packard Co. as the world’s top computer maker during the June quarter, is also aiming to grow Indian revenue in “excess of high-teens" this year.
“Without a doubt, the PC market is de-growing and in India also it has slowed down," said Babu. “But for the past few years, we’ve been clearly seeing that while there will be pressure on PC growth, there would be huge opportunities in both tablets and smartphones."
Lenovo, which is the last remaining major hardware maker in the world that has not branched into the information technology services sector, unlike global rivals such as HP and Dell Inc., also has no near term plans of venturing into the heavily competitive IT services market, Babu said.
“I think we will be a device organization. Our core DNA, our strength as an organization..I think will always be in devices," said Babu. The global IT services market is dominated by International Business Machines, Accenture and top Indian outsourcing firms such as Tata Consultancy Services Ltd and Infosys Ltd.
“I don’t see them moving into (IT) services (like HP and Dell) anytime in the short term," said Vishal Tripathi, principal research analyst at Gartner Inc. “One area which could prove to be a challenge for Lenovo in the near term is brand loyalty. In the devices arena, there’s no preferred choice from a consumer."
Lenovo’s focus on the tablet and smartphone market comes at a time when sales of personal computers are declining. In July, technology researchers Gartner and IDC estimated that global PC shipments declined by about 11% in the June quarter.
“For Lenovo, smartphones and tablets are going to be key drivers of growth in the near future, and that’s how they have to position themselves going forward," said Gene Cao, a senior analyst at Forrester Research Inc.
Over the past few years, consumers across the world have switched from traditional desktop and laptop computers to smartphones and tablets, most notably in North America, the world’s biggest technology market. The transition has affected the fortunes of traditional hardware giants such as HP and Dell, which have followed in the footsteps of IBM and moved into computer services over the last decade.
According to a May report by IDC, global PC shipments are expected to slump by a steeper-than-expected 7.8% this year, as sales of tablets overshadow portable computers for the first time.
According to Gartner, Lenovo currently leads the global PC market with a 16.7% slice, followed closely by HP with a 16.3% share in the market.
“Right now there is pressure for growth at a worldwide level and even in India, but the India growth is somewhat impacted by tablets, because the ‘refresh’ market has been impacted as people instead of buying new PCs in addition to their existing ones are preferring to buy tablets," said Babu who has been with Lenovo for nearly six years. “Also, the larger economic scenario is somewhat adding to the demand shortfall."
The company is also planning to nearly double the number of exclusive franchise stores it has in the country, with most of the new stores set to come up in tier-3 cities.
“We have about 1,200 stores now..we want to get it up to 2,000 by the end of the financial year (ending March 2014)...It’ll be more focused on tier-3 plus cities," said Babu.
For Lenovo, its “PC Plus strategy", which includes smartphones, tablets and televisions, that will drive growth faster in the near term in India.
“The growth in tablets and smartphones is obviously much, much more..we expect to drive growth as an organization on the whole PC plus space. We want to grow in terms of the pecking order in the PC plus arena worldwide. It will take time, as we’re in the entry stage," said Babu.
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