At the end of its second fiscal quarter ended Sept. 30, Chinese PC manufacturer Lenovo reported a 36 percent year-over-year increase in profit. After the successful quarter, Chris Frey, Lenovo's vice president of North America commercial channels and SMB, spoke to CRN about all things channel and what partners can expect from Lenovo moving forward.
The financial highlights in its earnings report included keeping its grasp as the No. 1 PC maker in the world, shipping more tablets and smartphones than PCs for the second consecutive quarter, and out-performing the market for 18 quarters in a row.
Frey went on to break the high-level numbers down further.
"We shipped a record total number of units last quarter of 29 million devices. If you think about that and do the math, that's four devices per second throughout the quarter. Those products were both PCs as well as in the PC-plus arena, which includes tablets and smartphones," Frey said.
Frey said Lenovo experienced growth across every area of the world for the quarter. The Americas region, within which Lenovo includes Canada, the United States, Latin America and Brazil, alone "grew at a premium to the market of 43 percent," Frey said. Much of the growth in the Americas Frey attributed to becoming No. 1 in Brazil, one of the fastest growing economies in the world.
In North America alone, Lenovo's commercial business saw its highest share to date, Frey said.
"In the commercial business, which obviously goes through the channel, we had our highest share ever at 12.9 percent, so almost up a whole point year on year as it relates to share," Frey said. In total, he added, Lenovo does about 85 percent of its commercial sales in North America through the channel.
"The channel business is really growing our SMB business. We again have outgrown the market last quarter at over a 25-point premium to SMB and that is driven by the channel," Frey said.
Of the channel-driven growth Lenovo experienced, much of it was due to a large increase of the actual customer base through a long-standing program Lenovo refers to as its "Customer Bonus Program." Through Lenovo's VAR business or "tier-two" business, the company posted a 45 percent growth in its new customer base.
"We're not just driving deeper in current accounts, we're acquiring new customers every single quarter and that is driven by the channel. [45 percent] is a big number," Frey said.
Frey said there are several things Lenovo partners should be looking forward to over the next few quarters, not the least of which is opportunity surrounding Windows XP end of life coming in April. The opportunities will inevitably include assisting customers in security and network bandwidth, Frey said, but the opportunity will not end in April. In fact, Frey believes partners will be reaping the refresh benefits well into the summer.
"I think most SMB customers probably aren't aware of what's really transpiring in April. You get to May, June, July, I think into mid-summer, that the refresh will continue for SMB once they realize what they are not going to be getting from a support standpoint," Frey said.
In light of the refresh cycle, Frey urged partners not to ignore the desktop, saying the desktop refresh is real and significant. Specifically, Lenovo's Tiny Desktop is the PC that is getting the most action in recent weeks.
NEXT: Lenovo Server Business Gaining Traction
Another aspect of Lenovo that is just beginning to gain traction is its server business, a space the company launched only a year and a half ago.
"The growth is over 100 percent year-on-year and quarter-on-quarter sequentially, but it is on a small base, and we realize it's on a small base," Lenovo's Frey said. The company began to crack the market with towers. "And of course the tower business a lot of time is driven by opening price points, and that's a good place to start, but certainly that is not a place we want to stay forever."
Now, Lenovo is seeing a rise in its rack business, which Frey said was a positive from a partner standpoint because of the numerous opportunities towers present to insert more options and wrap around more services.
Lenovo has taken the stance that the best way to get partners to promote technology is to get the technology in their hands. The company in August began distributing demo kits, known as Combat Kits, with four enterprise mobile devices for partners to take directly to the customer back. In a four-month period, according to Frey, the kits went into 600 different customer locations.
Starting in December, Frey said, partners and their engineering teams will be able to demo the products as well, with engineers being able to give a product their official stamp of approval.
"We will allow partners and particularly their engineers to utilize a demo kit that has a server and a notebook in it where the engineer can actually go demo the product, be comfortable with the product, and make sure that the business partner sales reps can go and recommend that product because the engineering department actually has endorsed it."
In addition, the Combat Kits will get a refresh, highlighting new mobile devices, some of which will sport the new Haswell processors. Additionally, the products in the Combat Kits will make a shift toward "consumer devices," Frey said.
"As the IT organizations start getting control of their environment again, and I think that is going to happen next year, they may want to tell their employees 'Don't bring your own device, choose your own device and I can buy it through one route, which is my route through my business partner,'" Frey said. "I want the partner and the customer to have the ability to have a commercial device and a potential consumer device that can be bought through one route versus telling the customer 'Buy commercial from me and go to a retail store.'"
One of the devices in the refreshed Combat Kit will be the 10-inch Yoga tablet, a device Frey said will be a game changer.
"[The Yoga tablet will] change the game because the tablet market has been pretty much the same form factors and the same experiences. I won't be surprised if the 10-inch [Yoga] in the channel gets a lot of traction quickly as people see it and touch it."
Given the statements on financials, channel programs and new devices, all things considered, Frey said, the numbers speak for themselves. "Lenovo is a good brand to bet on right now."
PUBLISHED NOV. 20, 2013