Currently, the Smart Bet's Against Lenovo

Lenovo (LNVGY.PK) reported disappointing results despite a huge market share in China. The shares have climbed 19% from July to Sep. The results are worse than expected and share prices have retreated. The corporate press release focused almost exclusively on cost cutting and optimizing distribution. No mention was made of any R&D or innovations that an end user might appreciate.

Lenovo acquired IBM’s (IBM) computer business and became the world’s third ranked PC maker. Management has become much too focused on the factory and close to home markets. Marketing and brand development efforts are anemic. North American shipments dropped by 9%. Asian sales (excluding China) were flat.

Lenovo needs to develop an effective marketing strategy outside of China. This raises an interesting question. While Chinese production is cheap due to low wage rates, is Lenovo truly sufficiently global to solve this business problem? If not, then Dell (DELL) and Hewlett Packard (HPQ) may pick up some additional market share with the windfall volume efficiencies. Currently the smart bet would be against Lenovo.

LNVGY.PK 1-yr chart:

Comments

[nik4242:]

re: lenovo, there is no doubt the almost Total lack of advertizing has hurt sales in usa. if they can get their smartphone price down and pull a cingular att&t merger, they may compete against nokia, etc. they are with avaya now; if alcatel lucent were to join forces with them, their fortune would change. i am holding on for the long term, fingers crossed not the part about ads and alcatel both may have merit- one never knows.

2007 Mar 27 09:12 PM