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Lenovo Must Convince Analysts Living-Room Push Beats Nintendo

January 09, 2013

Lenovo Coffee Table Tablet

An image provided by Lenoovo shows the IdeaCentre Horizon Table PC that they say is the first "interpersonal computer." It is a PC the size of a coffee table that works like a gigantic tablet and lets four people use it at once. (AP Photo/Lenovo)

Lenovo Group Ltd. (992) Chief Executive Officer Yang Yuanqing is betting he’ll find customers willing to pay $1,699 to roll electronic dice and play digital Monopoly on a touch screen for four. Analysts aren’t yet convinced.

The Horizon Table PC, a 27-inch touch-screen panel that enables multiple users to play games that Lenovo unveiled this week, will find a market with families looking for ways to rejoin members disconnected by individual devices, Yang said in an interview today at the annual International Consumer Electronics Show in Las Vegas.

Yang built the Chinese company into the world’s largest personal-computer maker last year, overtaking Hewlett-Packard Co. (HPQ:US) in shipments. Now he’s looking to expand the dominance into new areas from smartphones and tablets to family entertainment. Even after passing HP and overtaking Apple Inc. (AAPL:US) as the second-largest smartphone vendor in China, Yang has yet to convince analysts including Jonathan Ng he’ll triumph over Microsoft Corp. (MSFT:US) and Nintendo Co. in the living room.

“Lenovo is relatively new and faces some stiff competition,” said Ng, a Singapore-based analyst at CIMB-GK Pte, who rates the shares outperform. “Families who enjoy games together are likely to stick to game consoles like Xbox and Wii.”

Yang needs new product lines to keep profit growing. The company’s net income may gain 24 percent in the year ending March 31 and 23 percent next fiscal year, according to the average of 18 analyst estimates compiled by Bloomberg. Lenovo’s profit surged 73 percent last fiscal year.

Coffee-Table Sized

The Horizon is a coffee-table sized device that allows two or more people to use the screen at the same time, supporting 10-finger touch, according to Lenovo. It comes with a set of accessories including e-dice and four joysticks and uses Microsoft’s Windows 8 system to run games from developers such as Electronic Arts and Ubisoft, including “a modern take on the classic Monopoly” board game, Lenovo said.

The Horizon was inspired by a Chinese saying that states “when you’re together long enough, you want to separate. When you are separated long enough, you want to be together,” Yang said. This saying drove Lenovo to think differently about family entertainment systems, he said.

“When everyone uses their multiple individual devices, people” are becoming less connected, Yang said. “We believe people would like to reunite. Many older men in China are not happy with the current situation, when their family sits together to have dinner, everybody just plays by themselves with their smartphone and tablet.”

One barrier to wide adoption of the device will be the price, said Jean-Louis Lafayeedney, an analyst at JI Asia in Hong Kong, who rates the shares sell.

‘Interesting’ Product

“This is an interesting and innovative product, but end- demand will be limited at this point in time,” Lafayeedney said. “The price will remain relatively high as the specs will need to be strong to support the processing power needed for the touch screen, graphics and leading-edge central processing unit.”

Yang’s living-room push comes on the back of rapid expansion in the smartphone market.

Lenovo overtook Apple during the second quarter last year for second place in smartphone sales in China, the world’s largest handset market, researcher IDC said in August.

Overseas Push

The company, which only introduced its first touch-screen handset in China in 2010, vaulted from seventh place in the first quarter. In the past six months, Lenovo has expanded sales beyond its home market to Russia, India, Indonesia, Vietnam and the Philippines.

The company, which acquired International Business Machines Corp.’s personal-computer unit in 2005, accounted for 15.7 percent of global PC shipments in the third quarter, overtaking HP’s 15.5 percent, market-research firm Gartner Inc. said in October.

Lenovo’s thrust into the living room began in May when it unveiled four models of smart televisions. The devices use Google Inc.’s Android 4.0 operating system with Qualcomm Inc.’s Snapdragon dual-core processors. The TVs are currently available only in China.

Lenovo shares gained 36 percent in Hong Kong last year, outpacing the 23 percent advance in the benchmark Hang Seng Index.

To contact Bloomberg News staff for this story: Edmond Lococo in Beijing at elococo@bloomberg.net; Tim Culpan in Taipei at tculpan1@bloomberg.net

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net


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