Lenovo Group Limited (LNVGY): The Little PC Maker that Could

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A Simple, Balanced Strategy

Lenovo’s business strategy is to “Protect and Attack,” and as such, its business segments are labeled as “Protecting” businesses and “Attacking” ones.

Lenovo’s ‘protect’ businesses are its two main sources of revenue – its PC markets in China and the Rest of the World. Its ‘attack’ businesses are focused on expansion into emerging markets, coupled with growth initiatives in smartphones, tablets, and smart TVs. Lenovo’s attack business revenue has risen from 32% to 50% of total revenues over the past four years.

Its attack business also flourished in the EMEA (Europe, Middle East and Africa) region, posting 25.5% growth in PC shipments. That allowed it to become the second largest PC maker in the area with an 11% market share.

The other key attack business, Lenovo’s Mobile Internet and Digital Home (MIDH) segment – which produces its smartphones, tablets and smart TVs – posted sales growth of 77% from the prior year quarter. It now accounts for 11% of Lenovo’s total revenue.

Success in Smartphones

Most importantly of all, Lenovo’s smartphone business in China became profitable for the first time in its history. Lenovo’s smartphone market share in China rose from 1.7% to 14.8% between 2011 and 2012, placing it in second place behind Samsung but ahead of Apple.

Lenovo’s smartphones run on Google Android, and it has announced plans to release a Windows Phone in the coming year.

Research in Motion Limited (NASDAQ:RIMM)’s recent release of the BlackBerry 10 has also sparked rumors that Lenovo may be considering acquiring the Canadian handset maker, which has lost over 80% of its value over the past five years. Acquiring Research in Motion could help Lenovo’s planned smartphone expansion into overseas markets, since the BlackBerry is still a popular choice with Western enterprise users due to its comparably stronger security features.

If Lenovo is indeed set on pushing its smartphone operations overseas, then Apple and Samsung need to be worried. If Lenovo can post strong growth in a declining industry like PCs, think how much it could thrive in an even stronger, growing market like smartphones and tablets.

Lenovo is a textbook example of a company flourishing under clear leadership and solid execution. Its two-pronged business plan is easy to understand, it does not rack up debt to senselessly acquire ‘possible’ routes of growth like its American competitors, and it does not play musical chairs with its leadership. That’s how the little engine that could – Lenovo – grew to become an industry-crushing bullet train.

The article Lenovo: The Little PC Maker that Could originally appeared on Fool.com and is written by Leo Sun.

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