Lenovo Looks to Go Shopping Abroad

Posted on March 12, 2008
Filed Under China Business |

The South China Morning Post reports:

Lenovo Group will focus its overseas investment on emerging markets and continue to pursue acquisitions despite its failed attempt to buy Europe’s Packard Bell last year, according to its chairman.

Lenovo, which took over the personal computer division of industry giant IBM in 2005, has set its sights on India, Brazil, Mexico, the Middle East and eastern Europe for investments, Yang Yuanqing said.

Mr Yang spoke to reporters at the sidelines of the Chinese People’s Political Consultative Conference yesterday without giving the nature of such potential investment.

“Market penetration levels in those regions are relatively low,” he said. “More importantly, Lenovo can use its robust industry experience to develop these emerging markets.”

Acquisitions abroad could help widen Lenovo’s manufacturing base.

Lenovo leads international firms HP and Dell in the China market, but not internationally. Lenovo’s success in China has more to do with a strong domestic brand and deep distribution networks rather than marketing and sales wizardry. Those kinds of strengths aren’t easily replicated in new markets. By buying a domestic vendor Lenovo hopes to marry its emerging brand with local assembly factories and distribution networks.

Many of these countries, such as Brazil and India, are also pursuing ambitious informatization programs. Lenovo’s experience in developing low-cost PCs for the China market can be replicated elsewhere, possibly with direct or indirect government distribution support.

One concern is market demand as the world economy slows. India, like China, has a high growth PC market with plenty of scope for expansion. However, no other emerging economies have PC markets of a comparable size with similarly solid prospects for growth. An American recession and slowing growth worldwide could make a strategic international acquisition into a struggling subsidiary rather quickly.

If Lenovo is poking around in South America, Brazil’s Positivo Informatica should be on their radar. It began as an education company and expanded into publishing and now is the second biggest PC vendor in southern and central America. Their PC business would be a great acquisition for Lenovo. Or perhaps some stiff competition that shows the same stubborn strength that Lenovo has in China.

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