The world technology market has been dominated by Apple Inc. (NASDAQ:AAPL) for these past few years. Apple has enjoyed strong sales and ridiculous profits, riding largely on its tablets and smart phones. Only Samsung Electronics Co., Ltd. (LON:BC94)’s smart phone division seems to be giving the Cupertino-based any real challenge. Change may be brewing however, as the Chinese brand Lenovo Group Limited (PINK:LNVGY) has been enjoying increasing success with its laptops, smart phones, and tablets.
Lenovo Group Limited (PINK:LNVGY) is perhaps most famous for its business-line of laptops, the Thinkpad. Favored by executives around the world, the computers have built a strong reputation based on durability, functionality, and arguably the industry’s best keyboards. Lenovo acquired Thinkpad from International Business Machines Corp. (NYSE:IBM) in 2005. This move shook up the tech world and surprised many analysts. It was one of the first instances of a Chinese company acquiring a major American brand. Instead of piggybacking on IBM’s reputation, however, Lenovo used it as a launch pad to establish other computer lines, such as Ideapads, and to expand into new markets, such as smart phones.
Lenovo Group Limited (PINK:LNVGY) has been aggressively expanding its smart phone business in China. In just one year the company expanded its market share from under 2% to 15%. Now the company plans to expand into other emerging markets in the near future, hoping to lock up markets before the competition intensifies. In China Lenovo trails only Samsung Electronics Co., Ltd. (LON:BC94), which has a market share of just under 17% and is far ahead of Apple Inc. (NASDAQ:AAPL) with its 6.7% market share.
Lenovo Group Limited (PINK:LNVGY) is now the world’s second largest PC maker by PC shipments and is by-far China’s largest computer seller. Lenovo now owns 15.6 percent of the world’s PC market. So far profits have been thin, however, with the company reporting only a 1.6% profit margin, versus Apple’s 27%. Samsung, while still lagging far behind Apple, has been enjoying a healthy profit margin of 10%. The question now isn’t whether Lenovo can build and sell high-quality computers, but whether or not they can produce substantial profits off of their sales.
Lenovo Group Limited (PINK:LNVGY) is hoping that its aggressive moves into the tablet and smart phone market will help it boost its profit margins. The company is looking to launch its Lenovo Thinkpad 2 with Windows 8 in December to take on the iPad and Microsoft Surface. The company is also working on several tablet-laptop hybrids, such as the Lenovo Ideapad “Yoga,” which has already generated plenty of buzz at tech shows.
Lenovo’s computers have been lauded for both their reliability and functionality. Lenovo has been at the top, or near the top, of numerous reliability rankings and also scores well in customer loyalty. This has helped Lenovo expand its brand image and consumer base, while Hewlett-Packard Company (NYSE:HPQ), Dell Inc. (NASDAQ:DELL), and other manufacturers continue to struggle in the face of stiff competition.
Interestingly, while most PC and smart phone companies now rely heavily on outsources, Lenovo Group Limited (PINK:LNVGY) still manufacturers more than half of its computers. The company is even planning to open up a small U.S. manufacturing facility in North Carolina, outside of Raleigh, where it’s US headquarters is located. The company faces many challenges ahead, however, if past performance is any indicator the PC maker should be able to expand its market share, product line-up, and eventually profitability.