February 19, 2014
Lenovo recently announced record results for the third quarter of the 2013/14 fiscal year: the first time that the firm has exceeded US$10 billion in revenue in a single quarter. Lenovo has continued to prioritize maintaining or increasing its share of the PC market — the majority of its business. This strategy has paid off: Lenovo’s PC business (laptops plus desktops) grew by 8% year on year — in stark contrast to its slumping rivals. Lenovo can attribute its success to a strategy that sacrifices profit to keep prices competitive, maintains a direct local sales team, and retains channel partners after acquisitions.
Forrester believes that the mobile mind shift is one of four key market imperatives that enterprises can use to win in the age of customer. Lenovo has gotten a good start on this journey with its effort to enhance its mobile-related capabilities. Although the coming Motorola deal may have a negative impact on Lenovo’s performance over the next three to five quarters, the firm believes that mobile can change its business — and not just its digital business. In the next two to three years, Lenovo’s key strategy will be to provide customers with mobile devices and related infrastructure that will address their mobile mind shift. In particular:
- Acquiring Motorola can help Lenovo deliver more innovative products at a stroke. Tablets and smartphones have become a key growth engine for Lenovo, albeit a small one for the moment. New products that Lenovo launched in Q2 FY2013/14, such as the multimode Yoga and Miix2 tablets, brought strong sales to the vendor’s mobile business. But heavy R&D investment in new tablet and smartphone products has hurt Lenovo's earnings and long-term profits. Acquiring Motorola from Google can help Lenovo offset this.
- Acquiring IBM’s x86 server business can do more than boost profits. Lenovo expected its enterprise business to improve its profits — especially as Lenovo got IBM’s x86 server sales and marketing team, which knows enterprises, and systems integrators/value-added resellers that are more familiar with solution sales to end user organizations than PC resellers. But even more importantly, the acquisition of IBM’s server business gives Lenovo a stronger, more agile server infrastructure (e.g., PureFlex System) that will enhance its enterprise mobile solution.
To succeed in the age of customer, Lenovo needs to address further challenges and questions, including how it plans to hire mobile talent and technology expertise, leverage analytics to engage consumers in their mobile moments, and shift the way it thinks about mobile advertising. To help you modify your mobile strategies, check out some of Forrester’s regularly updated reports on the mobile mind shift.