Lenovo takeover strategy highlights : Cloud, mobile + enterprise

lenovo logoLenovo seems to be pulling the rug from under everyone’s feet with its high profile acquisitions of Motorola Mobility from Google and the low-end server business from IBM. Both multi-billion dollar deals, Lenovo is no stranger to the buy-and-build strategy in order to become a leader in its respective space.  Not only has the company managed to stay afloat despite the overall decline in PC sales, but it’s doing its best to mark its territory in emerging market opportunities including mobile, the cloud and the enterprise.

“We will continue to use acquisitions as a means to grow,” Lenovo CEO Yang Yuanqing said after the company’s stellar shareholder meeting in Hong Kong. “Whenever there is a good opportunity, we will grasp it.”

According to The Wall Street Journal, Lenovo executives say the company still has enough access to funds to keep growing its business.

Here’s a brief recap of Lenovo’s notable developments regarding the newest sectors of interest to the global powerhouse.

Making a mark in the enterprise


Lenovo started selling bare-bone servers in 2008, and it wasn’t until 2012 that the company established its Enterprise Product Group. Now it wants to expand by building its own server, software, storage, and networking portfolios.  To do that, Lenovo’s strategy is to acquire other companies that would help them reach that goal.

“If you look at the way our PC business grew, we were not shy of making acquisitions. We added companies that brought scale, they bought presence, they brought intellectual property,” Roy Guillen, vice president and general of the Enterprise Product Group at Lenovo,  said in an interview last year. “We’ve been looking at the same thing in enterprise and we’ll continue to do so.

  • Hardware: diversifying from the PC

Though Lenovo is now the top PC vendor, surpassing Hewlett-Packard, it has yet to solidify its mark in the server side of the business.  In the third quarter of 2013, it shipped 57,929 server units, a significant increase compared to the same quarter of 2012 when the company shipped 55,467.  Though the company’s server business is gaining traction, the increase in sales is still minute compared to that of HP, which sold 669,103 units in the same quarter, making the top server vendor for the third quarter of 2013.

The company remains positive especially when Intel’s Lenovo Haswell-based processors are set to come out in the third quarter of 2014.  Lenovo is looking to deliver flexible server offerings so customers can choose the right server for them.  This strategy will help Lenovo stand out from the likes of HP and Dell, who are all focusing on delivering converged offerings comprised of servers, software, networking and storage.

“Even though I could have a converged system … I bet 70 percent of the market doesn’t consume infrastructure in that manner,” Guillen said. “We think there’s a lot of technology in the supply base that’s not owned by Dell, HP and IBM that could help drive the efficiency of workloads much better.”

This is why the purchase of IBM’s server business is so important to Lenovo’s long term strategy, as it enhances the foundation for its own hardware portfolio and diversify away from the PC market.

  • Invested in software

Even as Lenovo bulks up its hardware portfolio, it will need to layer software on top of its physical components in order to truly compete for positioning as the enterprise seeks modern data center infrastructure.

LenovoEMCFor the software side of the Enterprise Product Group, Lenovo has invested $100 million in a state-of-the-art facility in Sao Paolo which will focus on areas such as software for server management, storage management, cloud technologies and other tools.  Outside of China and aside from the facility in Brazil, the company also have facilities in the US and Taiwan.

It also doesn’t hurt that the company has a strong relationship with EMC.  In 2012, the two companies entered a strategic partnership which was seen as a move to infiltrate China’s enterprise market.  In May 2013, Lenovo announced that its LenovoEMC portfolio of Network Attached Storage (NAS) will be available in the US, marking the start of the company’s entrance in the enterprise space in the US.

“Lenovo’s one of the few companies managing both enterprise and consumer spaces relatively successfully – Lenovo’s global model is what HP and Dell are trying to follow,” SiliconANGLE’s senior managing editor Kristen Nicole said.

The power of cloud


As for the cloud + mobile side, Lenovo is banking on the four-screen strategy: PC or laptop, tablet, smartphone and TV.  Lenovo aims to make sharing content as easy as possible no matter what device you are using, by leveraging the power of cloud.

With the cloud, consumers find it easy to access content from one device to another, as well as enable all of these devices to be used as controllers for other gadgets and services. Lenovo also envisions a future wherein your smartphone, tablet or PC can be used to control actions on another device.  And while this is an ecosystem several are taking, it remains an imperfect solution to the myriad of devices piling up in the home and office.

The cloud will be vital to Lenovo’s play for the enterprise space as well, where businesses are looking to software solutions to drive more access, management and work to be completed in the cloud. Banking on hyperscale technology, the enterprise is undergoing a massive change in order to gain from the perks earned in public cloud offerings, making solutions more scalable and cost-effective.

Aggressive mobile, global expansion


Despite strong PC sales, the same cannot be said of Lenovo’s mobile business.  Certainly the brand is very popular in China, but in other regions like the US and Europe, Lenovo has failed to entice consumers.  Still, the company is not losing hope, fully recognizing the need to dominate in mobile if it hopes to succeed in its well-established consumer space.

Most recently Lenovo announced that it will be acquiring Motorola Mobility from Google.  Some are laughing at this effort as Motorola is no longer one of the most sought out brands in the mobile market.  But the company believes that the fusion of Lenovo and Motorola could spark renewed interest in the devices the company has to offer.

We’ll just have to wait and see.  After all, the deal will go through a lot of scrutiny from regulatory boards in the US and China, which could hold up the deal or cancel it all together.  But if the deal does move forward, who know what the future may bring?  People did not expect Lenovo to surpass Dell and HP in the PC business, right?  We might wake up one day and Lenovo will be the one dominating the mobile market.

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