▶ US al­le­ga­tions strongly re­futed as PC man­u­fac­turer posts 14% in­crease in rev­enue for the sec­ond quar­ter

The National - News - - BUSINESS - ALKESH SHARMA

Len­ovo, the world’s largest man­u­fac­turer of per­sonal com­put­ers, has spruced up its se­cu­rity frame­work fol­low­ing re­ports re­lated to US al­le­ga­tions of the Chi­nese govern­ment’s at­tempts to spy through mi­crochips in­stalled in de­vices used in data cen­tres.

“That is­sue was re­lated to Su­per Mi­cro, which has never been Len­ovo’s sup­plier … se­cu­rity is our pri­or­ity and we have al­ways paid ut­most at­ten­tion to it,” Yang Yuan­qing, chair­man and chief ex­ec­u­tive of Len­ovo, told The Na­tional.

Su­per Mi­cro is a Chi­nese moth­er­board and stor­age man­u­fac­turer that as­sem­bled the ma­chines used in data cen­tres op­er­ated by Ama­zon and Ap­ple. Ap­ple and Ama­zon have de­nied a re­port that lis­ten­ing de­vices were in­cluded in their data cen­tres.

“Len­ovo is a trusted sup­plier not just in China but in Europe and North Amer­ica and that re­portage [of al­leged spy sys­tems] has not im­pacted our busi­ness,” said Mr Yuan­qing.

“How­ever, we have taken fur­ther steps to re­view our en­tire process of prod­uct de­vel­op­ment to make sure our prod­uct is safe. We have built a global im­age of a trust­wor­thy part­ner and it is in­tact.”

Len­ovo, also Chi­nese, posted rev­enue of $13.4 bil­lion in Q2 end­ing Septem­ber 30, up 14 per cent year-on-year.

For the third con­sec­u­tive quar­ter, Len­ovo achieved dou­ble-digit year-on-year rev­enue growth and this quar­ter’s rev­enue was the high­est quar­terly re­sult in nearly four years.

As far as the on­go­ing trade fric­tion be­tween the US and China, Mr Yuan­qing said no one will come out a win­ner.

“Glob­al­i­sa­tion has ben­e­fited all peo­ple glob­ally. Man­u­fac­tur­ing cost was low in China, so goods were sold cheap in the US and world­wide. In the be­gin­ning, there could be some con­flicts be­cause we [the US and China] don’t un­der­stand each other.

“But we should learn what’s the dif­fer­ence and then try to adapt to the dif­fer­ence … com­pro­mise with the dif­fer­ence. We re­spect each other, that’s why we saw a very suc­cess­ful in­te­gra­tion dur­ing IBM deal.”

Len­ovo had suc­cess­fully taken over IBM’s PC busi­ness in New York for nearly $1.75bn in 2005.

Cur­rently, Len­ovo has the largest global mar­ket share in the PC in­dus­try at 23.7 per cent, ac­cord­ing to the In­ter­na­tional Data Cor­po­ra­tion. It is fol­lowed by HP and Dell at 22.8 and 17 per cent mar­ket share, re­spec­tively.

Len­ovo, which is mainly a de­vice com­pany, is now shift­ing its fo­cus on to the ser­vice in­dus­try.

“The ser­vices busi­ness is Len­ovo’s fu­ture,” said Mr Yuan­qing. “That’s why in the last quar­ter, for the first time, we re­ported our ser­vice rev­enue reach­ing close to $700 mil­lion. Although it ac­counted for only 5 to 6 per cent of our to­tal busi­ness, it’s a good start.”

In the third quar­ter, Len­ovo’s PCs and smart de­vices busi­ness sur­passed the $10bn rev­enue mark for the first time – up 18 per cent year-on-year. The com­pany has in­vested nearly $1.5bn on re­search and de­vel­op­ment in the past fis­cal year.

“Per­cent­age-wise [of to­tal rev­enues], R&D in­vest­ment is not very high but it is a tra­di­tional PC in­dus­try norm. How­ever, with our new busi­nesses like data cen­tres com­ing up, we will in­crease our R&D in­vest­ment share,” said Mr Yuan­qing.

“In the past cou­ple of years, we have in­vested more on AI [ar­ti­fi­cial in­tel­li­gence] and smart tech­nolo­gies. Our fu­ture fo­cus ar­eas in­clude smart IoT [In­ter­net of Things], smart in­fra­struc­ture and smart man­u­fac­tur­ing.”

In­stead of ex­pand­ing in all mar­kets, Len­ovo is fo­cus­ing on cap­i­tal­is­ing on its best-per­form­ing ones in Latin Amer­ica, North Amer­ica, western Europe, In­dia and China.

“Two years ago, we tried build­ing higher scales and ex­pand­ing into more mar­kets but that strat­egy failed,” Mr Yuan­qing said. “We learnt from that ex­pe­ri­ence.”

“There­fore our fo­cus is on se­lec­tive mar­kets that have shown good growth in last few quar­ters. But this is the first step and if we man­age to main­tain the mo­men­tum in next quar­ters then we will adopt an ag­gres­sive ex­pan­sion ap­proach in other mar­kets.”

Re­fut­ing the in­dus­try ru­mours that PCs’ very ex­is­tence is threat­ened, Mr Yuan­qing said the in­dus­try is here to stay.

“The PC mar­ket is stable and grow­ing both vol­ume-wise and rev­enue-wise.

“It’s a $200bn in­dus­try. But we need to make this in­dus­try smarter and con­nected and that is our job to do.”

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