PC Sales, U.S. Channel Drive Strong Q3 For Lenovo

Lenovo Thursday announced record sales for its third fiscal quarter, driven primarily by strong notebook and desktop demand in the Chinese market and growth in the U.S. channel.

Its third fiscal quarter marked the eleventh consecutively that Lenovo has grown faster than the PC industry as a whole. The company reported record sales of $8.4 billion, up 44 percent from the same quarter last year, along with a gross profit of $954 million, up an even larger 47 percent year-over-year.

Despite a worldwide hard drive shortage that has shaken up the PC industry for months, Lenovo said its consolidated sales for laptop PCs jumped 30 percent year over year, totaling a healthy $4.5 billion. Laptop sales continued to be the largest contributor to the company’s worldwide sales, generating 53 percent of its total sales revenue.

The shortage didn’t seem to have much of an effect on Lenovo’s desktop sales either, which were up 32 percent compared to the same quarter in 2010, and totaled $2.8 billion in sales for the three-month period.

Lenovo, which is the world’s second largest PC maker, grew its presence in the worldwide PC market to a record market share of 14 percent. But perhaps more surprisingly, the company reported massive growth rates in its Mobile Internet business, specifically in the smartphone space. In China, Lenovo’s smartphone shipments increased 20 times year-over-year and shot up a staggering 400 percent from its second fiscal quarter. This growth was driven mostly by the successful launch of its A60 and P70 smartphones, it said.

Lenovo did not specify how many IdeaPad or ThinkPad tablets it sold during the three-month period, but said that shipments showed "good momentum."

NEXT: Lenovo's North American Channel Growth

The Chinese PC maker attributed much of its third-quarter growth to high demand within its own home base in Asia, but Lenovo’s Vice President of North America Commercial Channels Chris Frey assured CRN that the company’s success extended well into the States, as well. And its channel partners were largely to thank.

Frey said that Lenovo picked up about two and a half points of share in the North American PC market last quarter, driven by growth throughout all segments of its channel, ranging from SMBs, to large enterprises, to verticals.

"Our channel in North America is a big part of this success, and I believe that they’re also gaining from our success for them personally," Frey said. "Our segmentation of enterprise, public sector, small-medium business, and small business is growing through the channel – all segments. And our relationships in the channel at the segment level are the best they’ve ever been, and will continue to grow and foster. And our market growth is driving through the channel as well. So there is a nice reciprocal relationship, I believe, right now between the channel and Lenovo."

With another successful quarter under its belt, Lenovo channel partners are still looking ahead to 2012 with two main concerns in mind, Frey said. The first is a fear of an "economic uncertainty hangover," or a fear of IT budget constraints from 2011 spilling over into the new year.

"I think they [partners] feel a little challenged right now on how to bring solutions, keep them from being very complex, but allow productivity gains from their end user customer that could offset the costs during a potential IT budget constraint," Frey told CRN.

Lenovo is addressing this concern with its partner credit and end user financing programs, Frey said.

Partners' second biggest fear in 2012, according to Frey, is ensuring enterprise security. Depending on whether data is hosted on-premise, off-premise, or in the cloud, solution providers have a growing need to feel confident when recommending Lenovo products within such varying enterprise security models.

To ease this pain point, Frey said that "closer to the end of the year" Lenovo will be coming to market with new products that will better prepare solution providers for security conversations with clients. These new products will also empower end users to become part of the security solution, he said, rather than just implementing a piece of security software or adding another server to the equation.

While enterprise security concerns are escalating largely due to the bring-your-own-device (BYOD) phenomenon, Frey said end users’ shift toward consumerism isn’t a top fear among Lenovo partners. It was more of a concern last year, he said, when the movement was just warming up. Some partners were questioning which mobile devices would best meet customer needs, or how to introduce new mobile infrastructures at the lowest possible cost. But now, he said, partners seem a "little more comfortable" with the trend.

In terms of new channel programs and initiatives for 2012, Frey said partners can expect to see a stronger focus from Lenovo on the server and K-12 education segments of its business. They can also expect to see a push from Lenovo to finally beat out HP and claim the title of world’s largest PC maker.

"We’re very, very excited about the momentum we have right now, and we have our eye set on number one. And I don’t think it’s any secret, no matter who you talk to in the press or not," Frey said. "We’re focused on number one. We want to be number one. And we are going to continue to make sure that the company delivers on the strategy it’s been working on."