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Lenovo PC dilemma: HP has been leading for five quarters

via:CnBeta     time:2018/6/6 7:01:49     readed:80

In the opening of the JingDong 6 18 shopping festival a few days ago, Lenovo won the No.1 notebook sales, but the number one game book was taken away by old rival Hewlett-Packard (Hewlett-Packard). In the game notebook new users competition, Lenovo seems to lag behind the old rivals.

According to the data, in the first quarter of 2018, HP's shipment volume in the quarter increased by 4.3% year-on-year to approximately 568,000 units, and Lenovo only increased 5,000 units. According to a report from a third-party organization, IDC, Lenovo’s rival, Hewlett-Packard Co., has been leading the world’s shipments for five consecutive quarters, and the second leading edge of Lenovo has been expanding for three consecutive quarters.

At the Lenovo Global Sworn Conference in April, Yang Yuanqing, chairman and CEO of Lenovo Group, announced that Lenovo’s PC business will return to the top position in the coming year. As Lenovo’s most important cash cow business, Lenovo’s PC is in urgent need of a victory to prove itself.

Market share: Lenovo is getting farther away from HP

Lenovo has become the global PC leader for 12 consecutive quarters. These 12 quarters are also the glorious moments of Lenovo. However, Hewlett-Packard has been entrenched in Lenovo, and the difference between the two is always maintained at about 1 percentage point. The IDC report shows that the gap between the market share of the two companies is only 0.1 percentage points at the minimum, which is less than 70,000 units worldwide.

In the first quarter of 2017, with the completion of the product line and the strong growth of notebook products in all regional markets, Hewlett-Packard completed the go-ahead and led Lenovo by 1.3%. For such a gap, a number of interviewees in the industry stated that as long as one of them reduces the price promotion, it can achieve overtaking. At that time, Lenovo did not show panic, and its officials still stressed that "Lenovo's PC business is very healthy," and Chairman and CEO Yang Yuanqing also expressed his position, "do not care for a moment, the gains and losses of the matter."

Since then, Hewlett-Packard has continued to lead Lenovo for four quarters, and the lead has continued to expand. By the first quarter of 2018, HP had led Lenovo by 2.2 percentage points.

Compared with Hewlett-Packard, Lenovo still chooses multi-line business in parallel. Despite ushering in the best business and reports in the past three years, Lenovo’s transformation has not seen much improvement in terms of revenue and structure, and its advantages and challenges have not changed substantially.

In May 2018, Lenovo released its annual report for the last financial year that showed that it was affected by the new US tax law, which provided a one-time, one-billion-dollar fee, which also resulted in a loss of $189 million for the entire year. The PC business suffered a drop in profits due to the increase in upstream costs.

Analyst Liu Xueyan, an analyst from third-party consultancy IHS, told reporters that the PC market is already a very mature market, and brands can only make high volume shipments if they make a profit. Lenovo's current consideration is very practical. First of all, it is necessary to increase the unit price and stabilize sales so as to improve profitability.

A staff member of Lenovo who participated in the strategy study told the reporter that "HP has won the entire war." The strong commercial market has provided a strong backing for the consumer-grade low-end market impulse, while Lenovo's strategy has given up part of its low-margin sales. .

As one of the commanders who won this war, Kevin Frost, Hewlett-Packard vice president and global general manager of the consumer computer division, said in an exclusive interview with the Beijing News, “We have found the needs of mainstream consumers and market growth, and "Continuous attention and investment in the future," and the spin-off of the company two years ago, has made HP's market strategy more flexible.

Acquisition cannot solve Lenovo's PC dilemma

Lenovo has not had a price war with HP for two years. From the product line perspective, Lenovo and HP's basic coverage have all been from 2,000 yuan to 30,000 yuan in all price segments, so the performance of the regional market has become the key to the success of the two companies.

To expand the market, Lenovo's most common method is acquisition. In 2004, Lenovo, with a turnover of only 3 billion U.S. dollars, purchased IBM PC division with a turnover of 13 billion U.S. dollars for 1.25 billion U.S. dollars, and opened the global market. The drama of "snapping elephants" has still been regarded as a classic case by the global business school. Since then, Lenovo has integrated NEC PC and Brazilian company Digibras.

In November 2017, Lenovo established a joint venture with Fujitsu to control Fujitsu's PC business. Liu Xueyan said that the scale of Fujitsu is not large and Lenovo’s acquisition is for the market. Another industry source told reporters that Lenovo executive vice president Liu Jun needs to prove that it can bring Lenovo PC business back to the market first, and cooperation with Fujitsu is an important step.

However, Lenovo's integration of business is not smooth. Prior to the acquisition of ThinkPad, it faced cultural conflicts and the departure of senior executives. As a result, Lenovo incurred enormous financial pressure in the following five years, and even suffered a loss of nearly US$100 million in early 2009. At the same time, although Lenovo has already bought part of its assets to feed itself, the brand is still operating independently.

A person working in Lenovo’s PC business told reporters that several product lines were in parallel and did not really open up. In response to competition from new entrants such as Xiaomi, Lenovo had created a new series from the design of its existing product line, but this did not change the company’s overall operating strategy.

In fact, it is more difficult in the PC industry to rely on the acquisition of ammunition for a short time. In 2001, Hewlett-Packard completed the acquisition of competitor Compaq for $25 billion. However, after the assets were merged, Hewlett-Packard did not get the imaginary market share. In the following two years, Hewlett-Packard just barely maintained the original share of Compaq.

A number of interviewed HP executives told the Beijing News reporter that the rapid growth of the business has benefited from the company's overall spin-off. In their view, bringing together businesses that need to face different customers, the time for companies to deploy resources will become lengthy, and management costs will increase. The industry believes that after the spin-off of HP's business, the response will be faster before such opportunities as gaming notebooks.

Wu Jun, the author of the best-selling book “The Wave of the Tide,” analyzed in the book that companies that are at a disadvantage in competition must have problems with its management. If these problems are not solved, the problems after the merger will double, and they will be even more disadvantaged in the competition, thus further losing market share.

Lenovo needs a faster product line

Giving up sales to increase profits was once the strategy chosen by Lenovo. However, at present, Lenovo, which is in the context of being viewed in the background, needs the PC to retake the boss's throne to boost morale.

In April 2018, Yang Yuanqing announced at Lenovo's Global Swearing Conference that Lenovo’s PC business will return to the top spot in the coming year. The inconsistency behind this is that Lenovo has already passed the market stage of “small profits but quick turnover”. Currently, it needs the PC to maintain a strong profit and continue to provide blood for other businesses.

From the perspective of market performance, Lenovo's global major regional market shipments fell year-on-year. According to Mikako Kitagawa, a principal analyst at third-party consulting firm Gartner, quarterly results reflect Lenovo’s strategic shift from securing market share growth to securing profit margins.

As time goes by, HP's PC shipments have been growing for eight consecutive quarters. Zhuang Zhengsong, president of Hewlett-Packard China, told reporters, “You can think of yourself as an integrated service provider, but you can also think of yourself as a weapons supplier.” The latter obviously needs a more rapid market response.

At the end of May 2018, Hewlett-Packard held a marketing campaign for its new generation of gaming notebooks that invited players and game players to participate. Kevin Frost told reporters that for a company that once used corporate customers as its main target, this is simply unimaginable.

In line with this, the rapid expansion of HP's product line, especially the stylish design of ultra-thin notebooks and high-performance gaming notebooks in two categories. These investments have brought returns to Hewlett-Packard. In the latest quarter, net revenue increased by 12% year-on-year, and net profit increased by 89% year-on-year.

Lenovo also chose to launch products with different configurations and prices in different regions, but failed to address the real needs of the market. The above-mentioned Lenovo Chinese staff told the reporter that Lenovo had released a high-end notebook that was close to 20,000 yuan in the Chinese market, but sales were flat.

The worker said that due to the limitations of upstream purchasing capabilities, Lenovo's configuration is often behind HP for three months, which has affected the market's sales, customer service can only continue to appease consumers. Even with the same product on the line, because HP uses a better screen, even if the final price exceeds Lenovo's 500 yuan, consumers still choose to give up Lenovo and turn to HP.

"Cloud + AI" can solve the Lenovo PC dilemma?

In 2017, in the event of a major downturn in PC's main business, Lenovo announced high-profile announcements in the field of artificial intelligence. Yang Yuanqing said at the Innovation and Technology Conference that year that the company wanted to empower the industry and industry through "device + cloud" and "infrastructure + cloud", and announced that it established AI innovation centers in Beijing, China, Morrisville, USA, and Stuttgart, Germany.

Yang Yuanqing even expressed his position to let Lenovo become the world's three largest data centers. Lenovo announced at the time that it had 9 data centers in the world with more than 2,000 unitsserver. Globally, cloud computing service providersAmazonAWS has 3 million units at the time, andMicrosoftHas 2 million units, evenTencentwithAli CloudThere are also more than 500,000 servers.

For Lenovo, these ideas will undoubtedly require a huge amount of financial support. The financial report shows that its R&D expenses have decreased by 8.7% and 6.5% respectively since 2016. Its research and development and capital expenditures decreased by 10.2% year-on-year in fiscal year 2017/018, while Amazon’s growth rate was 45%, Google’s growth was 23%, and Microsoft’s growth was 6% year-on-year. Apple’s growth was 5% year-on-year.

Judging from the overall industry development, this is a long marathon race. For no reason, the decline in the PC market remains the same. The IDC report predicts that this market will drop by 3.5% year-on-year in 2018 and be more severe than 2.7% in 2017. At the same time, from the perspective of the regional market, none of them all eats up all markets.

In other words, HP's strategy is only to make it short-term lead.

In order to maintain its advantages, Kevin Frost told reporters that HP plans tocloud service, artificial intelligence, VR, 5G networks to make investment, and only in this way can continue to meet the needs of consumers. Among them, the cloud service will help users complete the switching of different screens, and voice interaction and 5G will bring new user experience.

Lenovo has similar plans. Yang Yuanqing once said that Lenovo has shifted from focusing on personal computers to focusing on personal computing devices and developing personalized devices and personalized clouds. “We want to compete with our competitors in this direction for a long time.”

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