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Lenovo’s American sales keep falling


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February 01, 2007

Lenovo’s American sales keep falling

Bruce Einhorn

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.

05:26 AM

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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.

Posted by: Nikolay at February 4, 2007 11:41 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.

Posted by: Ravi at February 8, 2007 12:13 AM

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.

Posted by: Businessking11 at March 1, 2007 03:41 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.

Posted by: ForTheKing at April 5, 2007 04:07 PM


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