Tags: China | Lenovo | HP | PC

China's Lenovo Ends HP’s Reign as Biggest PC Maker

Wednesday, 10 Oct 2012 06:50 PM

Hewlett-Packard Co.’s six-year reign as the world’s top personal-computer maker was ended by China’s Lenovo Group Ltd., highlighting the challenges facing Chief Executive Officer Meg Whitman as she strives to revive growth at the 73-year-old U.S. technology company.

Lenovo, which made a deeper push into the market by acquiring International Business Machines Corp.’s PC unit seven years ago, accounted for 15.7 percent of global shipments in the third quarter, compared to 15.5 percent for Hewlett-Packard, according to market-research firm Gartner Inc. While another firm, IDC, said Hewlett-Packard still had the No. 1 position by a slim margin last quarter, its research also showed Lenovo closing the gap.

Hewlett-Packard, which has held the top spot since 2006, lost share amid management upheaval and strategy shifts that included the possible spinoff of the PC unit, a prospect later abandoned by Whitman. The company has been harder hit by a slump caused by economic malaise and a shift away from traditional computers toward mobile devices, such as Apple Inc.’s iPad. Gains in less-developed countries are also helping Lenovo.

“Lenovo has been a beneficiary because of some of the acquisitions it’s made and its relatively high exposure to emerging markets, which are outperforming developed markets,” said Brent Bracelin, an analyst at Pacific Crest Securities. “It’s not just Lenovo, it’s part of a bigger trend across the consumer device market.”

China Gains

Lenovo’s climb has been powered by income growth in its home market, the largest for PCs and the world’s most populous nation, and a series of hardware acquisitions. Market-share gains have fueled profit growth exceeding 25 percent for 12 straight quarters. Chief Executive Officer Yang Yuanqing said in August that he won’t stop with a lead in PCs and aims to dominate in mobile devices as well.

Achieving the top spot is a “psychological milestone” that’s not likely to give Lenovo’s shares much of a lift because it has been anticipated by everyone, Dennis Lam, a Hong Kong-based analyst at DBS Vickers, said in an Oct. 9 e-mail.

The stock fell 0.8 percent to close at HK$6.17 in Hong Kong trading yesterday. Beijing-based Lenovo has gained 19 percent this year, compared with a 13 percent advance for the benchmark Hang Seng Index.

Hewlett-Packard fell 1.3 percent to $14.18 at the close in New York. Shares of the Palo Alto, California-based company have dropped 45 percent this year.

Intel Affected

Hewlett-Packard’s PC sales slumped after the company said it would consider spinning off the division last summer, a decision Whitman reversed soon after taking the top job. She told analysts on the last earnings call that the company would “defend our No. 1 position” in PCs.

The PC-growth slowdown is also hampering technology industry bellwethers Intel Corp. and Microsoft Corp. Intel is on pace to report its first sequential third-quarter sales drop in more than two decades, while analysts have predicted that Microsoft this quarter will suffer its first sales decline in two years.

The PC data released today contrasts with the previous decade when the PC industry experienced double-digit growth most years as companies and households bought up notebook computers. Those purchases have slumped as more people spend on Apple’s iPad or new smartphones.

The PC industry is seeking a boost from the introduction this month of the new version of Microsoft’s flagship operating system.

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Hewlett-Packard's six-year reign as the world's top personal-computer maker was ended by China's Lenovo Group, highlighting the challenges facing Chief Executive Officer Meg Whitman as she strives to revive growth at the 73-year-old U.S. technology company.
Wednesday, 10 Oct 2012 06:50 PM
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