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Lenovo North America's PC Surge: 5 Things To Know

The PC maker has been gaining market share driven by channel sales, and executives say they continue to expect strong demand in coming quarters.

Lenovo's North America PC business is seeking to capitalize on its best-in-the-market growth during the first quarter as continued strong demand is expected for the rest of 2020, Lenovo executives told CRN.

Matthew Zielinski, president of Lenovo's North America Intelligent Devices Group, and Rob Cato, vice president of North America channels in Lenovo's Intelligent Devices Group, spoke with CRN about how channel partners are helping to drive the growth and what the outlook is for coming quarters.

[Related: Lenovo 'Keeps Stepping It Up': Plans Device-As-A-Service Offering For SMBs]

The executives also discussed Lenovo's recent launch of Device-as-a-Service bundles that aim to make it easier to bring the solution to customers that continue to enable work-from-home in their workforces.

What follows are five key things to know about Lenovo North America's PC surge.

Market Share

During the first quarter of the year, Lenovo saw the biggest growth in U.S. PC shipments of any of the top manufacturers, according to research firm Gartner. Lenovo's shipments in the market grew 28.8 percent from a year earlier, while Dell rose 10 percent and HP Inc. fell 13.9 percent. (Gartner notes that its PC shipments figures do not include Chromebooks.)

The growth for Lenovo gave the company a 17.5-percent share of the market in Q1, according to Gartner, up from 13.7 percent a year ago--and kept the company solidly in third place for U.S. PC market share.

It was a record quarter for Lenovo North America, both in terms of revenue and market share, and "we did that despite what was probably the most daunting and challenging backdrop the industry has ever seen," Zielinski said. During part of the first quarter, PC manufacturing in China was shut down amid the COVID-19 outbreak.

In Q1, revenue in Lenovo's North America Intelligent Devices Group was up 12.9 percent year-over-year, Zielinski said.

"We are once again the fastest-growing PC vendor in the top five," though still at No. 3, Zielinski said. "But when we start posting growth numbers like that, we're closing the gap to No. 2."

Channel/SMB Growth

The surging Q1 growth was driven to a large degree by channel partners selling into small and medium-sized businesses, Zielinski said. SMB revenue jumped 40 percent during the quarter from the year before.

"SMB is certainly something that's working for us," Zielinski said. "I would argue it's our best and most profound success story in the [North America] region right now."

Lenovo currently has the "most robust channel that we've ever had. And it's clear that we're just extraordinarily committed to each other," he said. "Our commitment to the channel is that our strategy, our investments with them and how we operate won't waver for a second."

Outlook 

Lenovo executives said they are expecting the major PC demand to continue for work-from-home and distance learning for the rest of 2020, though there's a large amount of uncertainty ahead.

Lenovo, like other companies, is seeing pauses in spending from certain verticals, such as travel and leisure, Zielinski said. But that's being offset to some degree by increases in spending from public sector customers such as K-12 schools, he said.

"We have very robust demand still on work-from-home and on schooling from home, specifically," Zielinski said. "Our public sector business is very strong. Our production abilities are back up to 100 percent, if not more than they were pre-COVID, because we're literally running every line we can as fast as we can. And in the public sector space specifically, it's almost difficult to keep up with all the demand that's out there."

Demand is "very robust in K-12, even higher ed to an extent and other pockets of public sector," he said. "So things are shifting around, and we're watching things very closely. Things in an environment like this can change quickly. So you have to just watch it. But so far, things are stable relative to last year."

Ultimately, "net net, we do believe that demand stays very strong," Zielinski said.

Shifting To Notebooks

The types of PCs that customers are buying has continued to change in favor of more-mobile devices such as notebooks.

"Desktop is certainly an area that we see the mix significantly changing to notebook," Zielinski said. "That makes sense because if you have users working from home, usually if you're adding a device, and that device might travel with you, that sort of lends itself to more of a notebook environment."

It's the same dynamic in public sector and K-12 education, he said.

"If you think about schooling from home and bringing that PC with you to school, that's obviously more of a mobile [need]. So I would say, undisputedly we're seeing a shift toward mobile away from desktop," Zielinski said.

Device-As-A-Service

Lenovo recently debuted new Device-as-a-Service work-from-home bundles that partners can bring to customers, combining hardware, services and software, and offered as a monthly subscription.

"We created these specific bundles, prepackaged, to really help target work-from-home customers," Cato said. "There seems to be a lot of demand. There's certainly a lot of interest in freeing up cash flow. Device-as-a-Service provides some stability of knowing exactly what your monthly payments are going to be."

Among the key capabilities of Lenovo's DaaS solution is that customers can easily increase or decrease how many devices they need, he said.

"So as they may come back to an environment where the economy starts to rebound and they need to add more employees, they have the ability to flex up. Or if they need to, they can flex down," Cato said.

Going forward, "you will continue to see that transition from traditional capital outlay--upfront purchase--of many devices all at once, to more of a utility-type model where [customers have] very predictable invoicing that would be happening," he said. "And so as they transition over the next 12 to 24 months, I think you're going to see more of that."

Zielinski echoed that Lenovo is seeking to make the PC buying process as easy as possible with its DaaS solution.

"We don't hold people to certain contract amounts and we can scale upwards or downwards," he said. "We're really just doing our best to help take all of the objections off the table in terms of buying versus waiting."

Customers "have been kicking the tires on DaaS for quite some time, but we've definitely seen an uptick in the space," Zielinski said. "I do think that will manifest itself in some growth for us over the year."

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