China's Lenovo inches closer to a global tech title

Sun Jul 15, 2012 6:37pm EDT
 
Email This Article |
Share This Article
  • Facebook
  • LinkedIn
  • Twitter
| Print This Article | Single Page
[-] Text [+]

By Lee Chyen Yee

HONG KONG (Reuters) - Lenovo Group Ltd is on track to overtake Hewlett-Packard Co as the world's biggest PC maker by sales as soon as this year, making it the first Chinese company to grab the top spot globally in a technology sector.

The ThinkPad maker's rise highlights the advance of China's technology firms on the world stage in recent years thanks to a combination of aggressive pricing, overseas acquisitions and their taking advantage of a fast-growing home market.

Analysts, however, also warn that Lenovo's rapid gains in market share have come at the expense of profit margins, while the company faces slowing growth in the market for personal computers and tough rivals in the tablet PC space.

"It's just a matter of time before Lenovo becomes No. 1 and it won't be surprising at all if it happens later this year," said Frederick Wong, executive director at Avant Capital Management (Hong Kong) Ltd, which owns shares in Lenovo.

He added, however, that competition in the tablet sector and a weak PC market outlook could put pressure on Lenovo.

Lenovo, which became the world's No. 2 PC vendor in the third quarter of 2011, had a 14.9 percent global market share in the April-June quarter this year, a mere 0.6 percentage point away from HP's 15.5 percent, according to research firm IDC's latest data. Figures from industry tracker Gartner show an even narrower gap, with Lenovo just 0.2 percentage point from HP.

In another technology sector, China's Huawei Technologies Co Ltd, the world's No.2 maker of telecom equipment, had been expected to surpass Sweden's Ericsson in 2011 sales. But slow telecom spending, stiff competition in the handset market and difficulties in tapping the massive U.S. market held it back.

SWITCHING LANES   Continued...

 
The logo of Lenovo is seen on a computer monitor during a news conference in Hong Kong May 27, 2010. REUTERS/Tyrone Siu