Lenovo Has Started To Benefit From The Mobile Mind Shift

Gene Cao

Lenovo recently announced record results for the third quarter of the 2013/14 fiscal year: the first time that the firm has exceeded US$10 billion in revenue in a single quarter. Lenovo has continued to prioritize maintaining or increasing its share of the PC market — the majority of its business. This strategy has paid off: Lenovo’s PC business (laptops plus desktops) grew by 8% year on year — in stark contrast to its slumping rivals. Lenovo can attribute its success to a strategy that sacrifices profit to keep prices competitive, maintains a direct local sales team, and retains channel partners after acquisitions.

Forrester believes that the mobile mind shift is one of four key market imperatives that enterprises can use to win in the age of customer. Lenovo has gotten a good start on this journey with its effort to enhance its mobile-related capabilities. Although the coming Motorola deal may have a negative impact on Lenovo’s performance over the next three to five quarters, the firm believes that mobile can change its business — and not just its digital business. In the next two to three years, Lenovo’s key strategy will be to provide customers with mobile devices and related infrastructure that will address their mobile mind shift. In particular:

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Lenovo Bets On The Mobile Mind Shift And Aims To Be A Digital Platform

Frank Gillett

Lenovo’s made three strategic moves in just one month: 1) Buying IBM’s x86 server business, 2) Reorging into four business units – most importantly including one called “ecosystem and cloud group”, and 3) Buying Motorola Mobility. The later two are driven by the mobile mind shift – the increasing expectation of individuals that they can access information and service, in context, in their moment of need. Smartphones are central to that – as are the ecosystem and cloud services that deliver value through the smartphones.

Lenovo has stated intentions to become a leading smartphone maker globally, building on their leading position in the China market. Buying Motorola Mobility is a much quicker way for Lenovo to access the premium smartphone market with a leading Google Android (not forked Android) offering - than trying to do it with their existing design teams and brand reach. Using Motorola, just as Lenovo used the IBM ThinkPad brand, to gain quick credibility and access to desirable markets, and built critical mass makes a lot of sense. 

But Motorola has not been shooting the lights out with designs or sales volumes in smartphones. So the value is simply in brand recognition to achieve market recognition faster - and to dramatically expand the design and marketing team with talent experienced at US and Western markets. 

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Lenovo Buys IBM x86 Server Business

Richard Fichera

Wow, wake up and it’s a whole new world – a central concept of many contemplative belief systems and a daily reality on the computer industry.  I woke up this morning to a pleseant New England day with low single-digit temperatures under a brilliant blue sky, and lo and behold, by the time I got to work, along came the news that Lenovo had acquired IBM’s x86 server business, essentially lock, stock and barrel. For IBM the deal is compelling, given that it has decided to move away from the volume hardware manufacturing business, giving them a long-term source for its needed hardware components, much as they did with PCs and other volume hardware in the past. Lenovo gains a world-class server product line for its existing channel organization that vastly expands its enterprise reach, along with about 7,500 engineering, sales and marketing employees who understand the enterprise server business.

What’s Included

The rumors have been circulating for about a year, but the reality is still pretty impressive – for $2.3 Billion in cash and stock, Lenovo acquired all x86 systems line, including the entire rack and blade line, Flex System, blade networking, and the newer NeXtScale and iDataPlex. In addition, Lenovo will have licensed access to many of the surrounding software and hardware components, including SmartCLoud Entry, Storewize, Director, Platform computing, GPFS, etc.

IBM will purchase hardware on an OEM basis to continue to deliver value-added integrated systems such as Pure Application and Pure Data systems.

What IBM Keeps

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Lenovo Buys IBM x86 Server Business

Richard Fichera

Wow, wake up and it’s a whole new world – a central concept of many contemplative belief systems and a daily reality on the computer industry. I woke up this morning to a pleseant New England day with low single-digit temperatures under a brilliant blue sky, and lo and behold, by the time I got to work, along came the news that Lenovo had acquired IBM’s x86 server business, essentially lock, stock and barrel. For IBM the deal is compelling, given that it has decided to move away from the volume hardware manufacturing business, giving them a long-term source for its needed hardware components, much as they did with PCs and other volume hardware in the past. Lenovo gains a world-class server product line for its existing channel organization that vastly expands its enterprise reach, along with about 7,500 engineering, sales and marketing employees who understand the enterprise server business.

What’s Included

The rumors have been circulating for about a year, but the reality is still pretty impressive – for $2.3 Billion in cash and stock, Lenovo acquired all x86 systems line, including the entire rack and blade line, Flex System, blade networking, and the newer NeXtScale and iDataPlex. In addition, Lenovo will have licensed access to many of the surrounding software and hardware components, including SmartCLoud Entry, Storewize, Director, Platform computing, GPFS, etc.

IBM will purchase hardware on an OEM basis to continue to deliver value-added integrated systems such as Pure Application and Pure Data systems.

What IBM Keeps

IBM will keep its mainframe, Power Systems including its Flex System Power systems, and its storage business, and will both retain and expand its service and integration business, as well as provide support for the new Lenovo server offerings.

What Does it Mean for IBM Customers?

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With China Mobile, Apple Finally Cuts To The Core Of The World’s Biggest Phone Market

Frank Gillett

The deal between Apple and China Mobile has been a long time coming, with lots of folks disappointed it didn’t happen in September when the latest iPhones were announced. China Mobile is the world’s largest mobile phone operator, with 760 million subscribers. That’s more than 1 in 7 of all people alive, and, as my friend Charlie has reminded me, more than 6 times the number of the largest US carrier, Verizon Wireless, or 3 times the size of AT&T and Verizon combined. 

Though Bryan Wang in our Beijing office points out that Apple’s iPhone offerings are very expensive by China standards, starting at about $740 unsubsidized, he also reports that there is lots of interest among China Mobile subscribers. With this deal, we’ll finally find out how far Apple can get in China without offering products that match the prices of market leaders Samsung, Lenovo, and Huawei, or innovator Xiaomi. Based on Forrester survey data, we estimate that Apple sold over 16.8 million iPhones in mainland China in the four quarters ending September, 2013. We estimate that Apple will be able to sell 17 million new iPhones to China Mobile users in the first 12 months – that’s on the low side of public estimates we’ve seen ranging from 15 to 30 million. So Apple will boost global iPhone sales – and iPhone revenues – by over 10%.

After waiting so long, why is China Mobile interested in the iPhone? Because they’re concerned about losing their best customers, which are some of China's most valuable ones, to China Telecom and China Unicom. And China Mobile is just launching the first 4G network in China, and Forrester believes it will have at least a 6 month head start before other operators begin adding 4G. The iPhone 5s and 5c give China Mobile showcase products to show off the power of their 4G network.

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The Mobile War Is Not Over

Thomas Husson

Let’s step back to January 2007. Do you remember what your job was at that time? I was already an industry analyst covering mobility, and at that time, the space was less fascinating to cover. Back in January 2007, Google had acquired YouTube for $1.65 billion only a couple of months before. Android did not exist. The iPhone did not exist. Twitter did not exist. Facebook was only a couple of months old as an open public website. Nokia had a market valuation of around $120 billion, and its share of the global smartphone market was above 45%. BlackBerry – then the leader in enterprise mobility solutions – had initiated a move in the consumer space with the BlackBerry Pearl.

Less than seven years later, Google has activated more than 1 billion Android devices, and Apple will soon pass the 700 million iOS devices mark. YouTube now has more than one billion users globally and generates 40% of its traffic from mobile devices. Facebook has 1.2 billion users and generates 41% of its ad revenues from smartphones and tablets (it could even reach 50% in Q3 2013; Facebook discloses its financial results on October 30). Twitter has more than 230 million users and generates more than 70% of its revenue via mobile.

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Is IBM Selling Its Server Business To Lenovo?

Richard Fichera

 

The industry is abuzz with speculation that IBM will sell its x86 server business to Lenovo. As usual, neither party is talking publicly, but at this point I’d give it a better than even chance, since usually these kind of rumors tend to be based on leaks of real discussions as opposed to being completely delusional fantasies. Usually.

So the obvious question then becomes “Huh?”, or, slightly more eloquently stated, “Why would they do something like that?”. Aside from the possibility that this might all be fantasy, two explanations come to mind:

1. IBM is crazy.

2. IBM is not crazy.

Of the two explanations, I’ll have to lean toward the latter, although we might be dealing with a bit of the “Hey, I’m the new CEO and I’m going to do something really dramatic today” syndrome. IBM sold its PC business to Lenovo to the tune of popular disbelief and dire predictions, and it's doing very well today because it transferred its investments and focus to higher margin business, like servers and services. Lenovo makes low-end servers today that it bootstrapped with IBM licensed technology, and IBM is finding it very hard to compete with Lenovo and other low-cost providers. Maybe the margins on its commodity server business have sunk below some critical internal benchmark for return on investment, and it believes that it can get a better return on its money elsewhere.

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The Tablet Market Is Fragmenting Into Subcategories

JP Gownder

In recent research, I have laid out some similarities and differences between tablets and laptops. But the tablet market is growing ever more fragmented, yielding subtleties that aren’t always captured with a simple “PC vs. tablet” dichotomy.  As Infrastructure & Operations (I&O) professionals try to determine the composition of their hardware portfolios, the product offerings themselves are more protean. Just describing the “tablet” space is much harder than it used to be. Today, we’re looking at multiple OSes (iOS, Android, Windows, Blackberry, forked Android), form factors (eReader, tablet, hybrid, convertible, touchscreen laptop), and screen sizes (from 5” phablets and to giant 27” furniture tablets) – not to mention a variety of brands, price points, and applications. If, as rumored, Microsoft were to enter the 7” to 8” space – competing with Google Nexus, Apple iPad Mini, and Kindle Fire HD – we would see even more permutations. Enterprise-specific – some vertically specific – devices are proliferating alongside increased BYO choices for workers.

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Windows 8 & Lenovo – The Good, the Bad and the Bugly

Richard Fichera

I recently bought myself a Lenovo ThinkPad Tablet 2 running Windows 8 because I want a tablet device that can really run Windows and PowerPoint when I need them, and I have found all the iPad Office solutions to be lacking in some fashion. When I saw the new Lenovo ThinkPad Tablet 2, it was love at first byte.

Like in all relationships, some of the new has worn off, and since it’s “Internet time”, it has only taken a couple of weeks as opposed to years to see my partner in a more realistic light.

So, here is my list of the good and the bad (architecturally, structurally) and bugly (things that can probably be fixed).

The Good – Excellent Hardware, Fluid and Attractive Interface

There are many good things to say about this combination:

  • It’s the lightest Windows device I have ever owned, and its general performance and usability is light years ahead of a horrible Netbook I bought for one of my sons about two years ago.
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Why Dell Going Private is Less Risk for Customers than their Current Path

David Johnson

To publish this post, I must first discredit myself. I'm 42, and while I love what I do for a living, Michael Dell is 47 and his company was already doing $1 million a day in business by the time he was 31. I look at guys like that and think: "What the h*** have I been doing with my time?!?" Nevertheless, Dell is a company I've followed more closely than any other but Apple since the mid-2000s, and in the past two years I've had the opportunity to meet with several Dell executives and employees - from Montpellier, France to Austin, Texas.

Because I cover both PC hardware as well as client virtualization here at Forrester, it puts me in regular contact with Dell customers who will inevitably ask what we as a firm think about Dell's latest announcements to go private, just as they have for HP these past several quarters since the circus started over there with Mr. Apotheker. Hopefully what follows here is information and analysis that you as an I&O leader can rely on to develop your own perspective on Dell with more clarity.

 
Complexity is Dell's enemy
The complexity of Dell as an organization right now is enormous. They have been on a "Quest" to re-invent themselves and go from PC and server vendor, to an end-to-end solutions vendor with the hope that their chief differentiator could be unique software to drive more repeatable solutions delivery, and in turn lower solutions cost. I say the word 'hope' deliberately because to do that means focusing most of their efforts around a handful of solutions that no other vendor could provide. It's a massive undertaking because as a public company, they have to do this while keeping cash-flow going in their lines of business from each acquisition and growing those while they develop the focused solutions. So far, they haven't.
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