Lenovo Exec: PC Growth 'Continues To Explode,' More AMD Devices 'A Good Possibility'
Matthew Zielinski, head of Lenovo's PC business in North America, says the company’s launches at CES 2020 will help set up another year of major growth for the company.
Lenovo started off 2020 with one of the most buzzworthy—and channel-worthy—set of product launches at CES.
While the company's foldable ThinkPad drew the most attention at CES 2020, Lenovo also introduced a differentiated new model to the SMB-focused ThinkBook portfolio; unveiled the first PC that will feature built-in support for 5G; and announced a number of other business-friendly PCs, such as updates to the popular ThinkPad X1 Carbon and X1 Yoga.
[Related: The 10 Most Innovative Laptops From CES 2020]
The product launches come as Lenovo continues to capture a larger share of the North American PC market with the help of channel partners. The company finished off 2019 with a 14.9 percent share of the U.S. PC market in the fourth quarter, up from 14 percent the year before, as shipments climbed 11.2 percent, according to research firm Gartner.
"Our growth continues to explode," said Matthew Zielinski, president of Lenovo's North America Intelligent Devices Group, in an interview with CRN during CES 2020 in Las Vegas. "And that remains a true testament to the health and the engagement and the loyalty we have for one another with our channel."
The growth for Lenovo has come even as Intel's CPU shortage has dragged on.
"We have left demand unserviced as a result of some of the Intel shortages," Zielinski said, adding that the company is working "very closely" with Intel while also considering an expansion of its offerings that tap alternative suppliers such as AMD.
What follows is an edited portion of the conversation with Zielinski.
What have been the results in your PC business over the past few quarters in North America?
Things are still going extraordinarily well. If you look at our first half of fiscal 2020, we were up 14 percent total in terms of revenue, 16 percent on units. When we talked this time last year we were the fastest-growing PC vendor of the top five in 2018, and in 2019, we continue to be the fastest-growing PC vendor in North America of the top five. [Globally] Lenovo is still No. 1, five quarters in a row. As a group we just came off of our ninth consecutive quarter of sequential revenue growth, which is very solid. And since we're at the Consumer Electronics Show, it's probably worthwhile to say that we're also the fastest growing in consumer PCs for the last five quarters. So business is very, very good.
SMB is a huge portion of our channel business. And in the first half, our SMB business was up another 26 percent annually. So our growth continues to explode. And that remains a true testament to the health and the engagement and the loyalty we have for one another with our channel.
The corporate business is very strong—that was up high single digits year to year. Our acquisition count of new logos was up 86 percent year to year. So our pipeline of new corporate customers is just off the charts. We had a record first half in workstations, with revenue up 40 percent—the best first half we've ever had. We continue to truly accelerate there with our eyes on 20 percent of the market. Public sector remains very strong—another big element of what we do in the channel. That business was up over 16 percent year to year. K-12 is very solid, up just south of 20 percent. Higher [education] is up high single digits, and our state and local government business was up about 23 percent.
Our services business is up almost 40 percent year to year, and that's through our channel as well. It's tough to find a stat that we don't like right now. And we're just getting started. We're still No. 3 in the market. We've taken 400 basis points of share. Our goal remains to be No. 2 in five years, and have 20 percent of the market within three years. And based on our execution thus far, we think we've got a heck of a shot at it.
Are you attributing a lot of this growth to the channel moves you've made in the past couple of years?
There's no doubt about it. We've tuned our program stack very well. Path to Platinum has helped us significantly. The migration numbers [of partners moving to higher program tiers] are very healthy. If I think about the natural evolution of our channel business, our strategy is working.
What we augment as we go into 2020, No. 1 is the partner portal. Velocity—which is our effort to customize portals for partners—will launch in the middle part of the year. That will bring significant automation to make things faster. I think we've got some catching up to do there. As much as we've done it better than last year, it's still a bit of manual effort. So it's time to get a bit more modern in our approach there. Our channel engagement is very strong, but one area we're going to be very focused on in 2020 is continuing to grow outside of SMB—certainly in corporate. We have to continue to refine our engagement with the channel through our communities, and just how we do good old-fashioned co-selling together. And I think what you'll also see in 2020 is a lot more co-selling and leveraging between the full portfolio of Lenovo. So whether that's bringing [Data Center Group] products into the conversation, or even our mobile business products into the conversation. We're going to start to play a lot more chess there as we get into 2020 as it relates to looking to acquire a lot of the bigger customers.
Do you expect to make any changes in your CPU supplier mix as the Intel shortage continues?
One of the nicest things about being the biggest PC maker on the planet is scale. And the fact is that component hiccups always happen, and we have a very vast supply chain and we're very well equipped to deal with these sorts of things. We have left demand unserviced as a result of some of the Intel shortages. We are working very closely with Intel on a daily basis to improve the linearity of the supply, or even just to get more. But we're also proud of the fact that we have an extraordinary—perhaps the best in the industry—stable of options that include other vendors like AMD, like different ARM vendors. I think we have a very good portfolio of AMD-based products specifically. And at the end of the day, we want to build products that people want to buy, when they want to buy them. And the fact that we have more choice available out there I think serves us very well.
Could there be an increase in AMD-based products this year from Lenovo?
I think it's a good possibility. And again, the core of that decision is really just to offer our customers the choice, and let them vote with their wallets.
Let's talk about your new device launches at CES—tell me first about the ThinkPad X1 Fold.
I think this is the hottest device at CES. Why are we pursuing foldables? Our research shows that there are a lot of people out there that have multiple devices—an e-reader, a smartphone, a tablet, a PC. What this does is it consolidates a lot of these experiences. And it's extraordinarily versatile, it's extraordinarily personal—and no pun intended, by far the most flexible device on the planet.
It does come with a detachable keyboard. This keyboard actually has the same scissor lift action that our ThinkPads do, which just feels good. It's magnetic—slips right into the crease [when the device is folded]. It also charges while it's inside of the device.
What would you say to channel partners about what this means—that you're going to be first to market with something like this?
This is a great example of what I talked about with doing better co-selling and co-engagement as we go attack new markets together. I think this is so new and fresh, this is going to take a village to really distill and help coach people on the art of the possible. I think customers are going to immediately have their own ideas of which verticals this [is for]. But I do think there's significant collaboration that we can do with our channel on this device.
Lenovo is also the first with a laptop that supports 5G by default, the Flex 5G. Do you see 5G eventually becoming the dominant way for laptops to connect?
I think over time. And that aperture is probably significant. Our data suggests right now that there are 30 to 40 markets that are 5G-ready, and some of the stats we've seen are that maybe 14 percent of the population by 2021 will have 5G coverage. So, if you're in a [5G] market, certainly that could happen. I think we have some time for the build-out to transpire. But our attitude really is, let's not wait for the network to build out, and then build devices—let's build devices and be ready to catch [the demand] when a new market goes live on 5G.
You're also expanding the ThinkBook lineup with a new model.
The ThinkBook was born last year. Our data showed that the new workforce, and the SMB workforce specifically, wanted a consumer look and feel but commercial manageability. We have 10,000 researchers, engineers and scientists out there building and designing products. But some of the best innovations are just born from direct customer feedback. And we had a customer say, 'I've got 10 people sitting around a conference room, and I've got 10 [laptop] lids open. That sure is distracting. Is there a way to eliminate that?' And we got to thinking, and that was the birth of the ThinkBook Plus. So it's a 13.3-inch typical display that I'm looking at, and then on the outside there is an E Ink display. [It shows] your calendar, email notifications. Much less distracting and you can still catch anything urgent. It has integrated Amazon Alexa. And if you make a note [with the digital pen], it automatically transposes itself to Microsoft OneNote.
So, this isn't necessarily rocket science, but it's a very cool innovation that our customers asked for that I think is going to resonate for SMB users and beyond.
What should partners expect this year from Lenovo?
We're going to stay consistent. Our numbers would suggest that things are moving very, very well. And that truly is a testament to our mutual commitment to one another. So I would say, we're going to stay consistent like we promised. I would also say we're going to continue to improve and be the best we can, in terms of engagement—good old-fashioned, person-to-person engagement on the ground with our channel. So expect more from us in 2020 there. And really, the last message is, we've got a lot to go after here. We still have a lot of tailwinds in the business. So let's go capture and win the hearts and minds of as many customers as we can.