Lenovo’s American sales keep falling

Posted by: Bruce Einhorn on February 01, 2007

Lenovo can’t seem to get many Americans to accept the idea of buying computers from a Chinese company. Today China’s No. 1 PC maker came out with its quarterly numbers and they show that Lenovo’s shipments of PCs in the Americas dropped 4% in the quarter ending Dec. 31. This despite an intense effort by the company to convince Americans that it’s okay to buy from Lenovo, which acquired the old IBM PC division in 2005. A year ago, Lenovo launched with great fanfare a line of new, low-cost computers designed for American users, especially small and midsized businesses. Lenovo also announced that the new computers wouldn’t have the letters IBM or the word Think, even though Lenovo had rights to them thanks to its IBM acquisition.

At the time, lots of observers were upbeat about Lenovo’s chances. In the BW story that I wrote then, I quoted one analyst saying that the new Lenovo computers “should be great.” Maybe they are, but so far Lenovo’s position in the U.S. hasn’t improved. It’s been almost a year since Lenovo launched this effort to win hearts and minds of Americans, and not only hasn’t Lenovo boosted sales, it seems to have lost more ground. One reason might be hesitation on the part of some buyers to purchase PCs before the launch of Vista, but that didn’t seem to hurt HP, which enjoyed double-digit growth in the U.S. last quarter. Meanwhile, according to market research firm IDC, “Lenovo continues to struggle with declining volume” in the U.S. Some other disappointing news for Lenovo: Sales in Asia-Pacific (excluding Greater China) dropped 1%. That’s significant because the company has been trying to reduce its reliance on revenue from its home base in China. Another part of the diversification strategy has been a push beyond PCs into cell phones, but there are problems there, too. Lenovo announced that its mobile handset division suffered a 6% drop in sales for the quarter.

The Lenovo folks are trying to put a good spin on this, of course. Sentence three of the company’s statement to the press boasts that the company’s overall sales grew approximately 8%, “ahead of the industry average of approximately 7 percent.” One problem. According to IDC, that’s not quite true. In mid-January, IDC announced market figures for the same period. First words of that press release: “Worldwide PC shipments grew by 8.7% in the fourth quarter of 2006.” In other words, Lenovo’s sales actually were worse than the industry average.

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Reader Comments

Nikolay

February 4, 2007 11:41 AM

I am not surprised that Lenovo is having hard time establishing a strong presence in the US. Brands are very important in the States and Lenovo is not doing anything (visible) to promote themselves to the US consumer. Over Christmas they did not push hard with a campaign -- at least it was not visible.
On top of that PC Magazine did a survey of laptops and determined that 14% of Lenovo laptops needed repair in the first year -- that was (per PC Magazine http://www.pcmag.com/article2/0,1895,2006499,00.asp) very poor performance (apparently only Gateway had lower score of 15%)....Overall Lenovo notebooks scored very well in terms of performance but if you combine the repair results (average) plus the notion of a Chinese brand (living in China you can see how even the Chinese consumers feel), you can see how Lenovo needs to spend a lot of effort on convincing the consumers and business buyers alike of their credibility and staying power. I think in the long run Lenovo will succeed but they will need to spend quite a bit to establish the brand.

Ravi

February 8, 2007 12:13 AM

It is all service. Lenovo's pinching pennies on service. My laptop was defective out of the box. They have changed system board and changed wireless card. Still ethernet was not working and everytime the power is swithed off wireless stops working. They will not even refund money (system directly purchased from Lenovo). Lenovo will waste customer time rather than replace the system. When a business pinches pennies and forgets to attend to the customer spending the pennies, next time customer won't be spending his pennies with them.

Businessking11

March 1, 2007 03:41 PM

No surprises there. What did Lenovo expect? It makes bad PC's, then backs it up with bad service. Dell and HP have much better PC's maybe at a little more priced, but atleast they don't let you down at moments when you most need it. Lenovo needs some serious quality control.

ForTheKing

April 5, 2007 04:07 PM

Lenovo's Chinese owner couldn't get the quality control right. Their relationship with OEM suppliers has gone sour. The situation will only get worse before any possibility of turning around.

rob

July 4, 2007 05:46 AM

Ordered some laptops , had to cancel after undelivered for THREE months.
What do you expect chinese products with US price.

Jia Ming

July 5, 2007 12:12 AM

I am reading these comments from American readers and I am amazed. Basically Lenovo is making the same PCs as IBM used to. Now, the Americans have sold the money-losing business to the Chinese and all of a sudden, every American is jumping on the bandwagon trashing it. This behavior is down right dishonest.

Pavan

March 5, 2008 12:13 PM

@ Jia Ming, its not dishonest, its clear that once well known brand IBM PCs or at least thinkcentre have now gone down in quality. I can't blame entirely on Lenovo for this, but one thing is for sure, this all happened once Lenovo took possession of IBM PCs. I still like IBMs over others, but Lenovo has to put alot of effort into QC, marketing and customer service (which recently is known as the "worst" in the market). I have seen and heard very horrible stories with Lenovo customers with Lenovo's customer service. You should first build trust and faith among customers inorder to build a strong base in the market and Lenovo lacks this and is very poor at this.

Cass

April 25, 2008 06:07 PM

Purchasing a laptop from Lenovo is one hell of a nightmare.

1. I've gone to bestbuy, circuit city, and other computer store. It appeared to me that I had to buy it "online". Fine. So I had to go to lenovo's web and placed my order. Then, I got this stupid reply after charging my credit card:

“We are unable to accept an international credit card for payment on your Lenovo order number …..
Acceptable forms of payment include: US Credit Card, US Debit Card, Wire Transfer or Check by Mail”

Great! Why not specify this right before the customer places an order?? Besides, it’s a Citibank credit card. Isn’t Citibank recognized internationally? Or Lenovo is simply a nazi hating company? Why sell product to the US?

2. So I had to phone Citibank and cancel such and had to use other credit card that is acceptable to them (Fine again). I work from Monday to Friday, full time. So, I requested the agent to ship the laptop to the leasing office of my apartment so that they can receive it for me while I am at work. Again, I got an ingenious reply:

“We were unable to verify your billing information with the bank for your order #
Please contact us with your name and address exactly as it appears on your credit card statement. In addition, for security purposes, we require that you call your bank and have your shipping address added to your credit card file”

Called my Bank at least 5 times and Lenovo at least 7 times with an average wait time of 15 minutes before getting hold of somebody. I ended up changing my credit card’s billing address to my apartment’s leasing office!!!!

3. A moment of relief as my order was shipped after 2 grueling weeks. Then, after a few days my nightmare was back. Lenovo did not put the leasing office address and used my apartment address instead. So the shipper kept coming back to my apartment while I’m at work.

4. What else could go wrong?? I phoned the shipper and requested if I can pickup the package after work and they said – “No! Lenovo made an instruction that ship to address only. No pickup option”

The shipper will not deliver the package to the leasing office and I can not pick it up. What else I could do go on leave and lose money? I am a no work no pay employee. If I knew that this was going to happen I will never place the order.

What’s wrong with Lenovo’s management? They are expecting customers who can afford an expensive laptop and who can wait for the shipper at home 24x7? I wouldn’t be surprised if their sale drops significantly.

Vince N

June 6, 2008 12:16 PM

@Jia Ming or anyone who thinks Lenovo is the same as IBM, I don't agree. It is like you have lived in your house for sometime, you have kept it well, then you sell it to someone, and you assume that "someone" will maintain the house the same way you did? No!

For me, the problem is the association of bad products/bad services with a Chinese brand. I am not discriminating or hating. But Lenovo should set it afar from the rest by providing exceptional services for their products. Or to convince people that their products are in great quality. One way to do that is to provide a much longer warranty period (i.e. 5 years). That will be a strong message saying that they are confident in their products, and they will back it up if necessary.

You need to convince people. Currently I am not convinced. I used to buy IBM computers, but since Lenovo interception, I switched to HP. The company where I worked (a very big customer of IBM) had used IBM laptops exclusively, but then they switched to Gateway to avoid the Lenovo brand.

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BusinessWeek’s team of Asia reporters brings you the latest insights on business, politics, technology and culture from some of the world’s biggest and fastest-growing economies. Eye on Asia’s bloggers include Asia regional editor Bruce Einhorn, Tokyo reporter Ian Rowley, Korea bureau chief Moon Ihlwan, Asia News Editor and China Bureau Chief. Dexter Roberts, and Hong Kong-based Asia correspondent Frederik Balfour.

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