Lenovo and Other PC Makers

choi

Chinese industry | From Guard Shack to Global Giant; How did Lenovo become the world’s biggest computer company?
Jan 12th 2013
http://www.economist.com/news/bu ... -shack-global-giant

Quote:

Once again Lenovo's ThinkPad, or corporate PC, came back to life ("shipments have doubled since the deal, and operating margins are thought to be above 5%"), reconsituting "its [Lenovo's] two huge profit centres—corporate PC sales and the China market."

"In most markets outside China, Lenovo’s mobile phones, tablets and consumer PCs (as opposed to corporate sales of ThinkPads) lose money * * * [currently] its pretax profit margin of 2%.

"The firm is strikingly unChinese in some ways. English is the official language. Many senior executives are foreign. Top brass and important meetings rotate between two headquarters, in Beijing and Morrisville, North Carolina (where IBM’s PC division was based), and Lenovo’s research hub in Japan. Only after giving two foreigners a try did Mr Liu push for a Chinese chief executive: his protégé Mr Yang. Mr Yang, who spoke little English at the time of the IBM deal, moved his family to North Carolina to immerse himself in American ways.

"Still, the firm has some way to go. It is far too reliant on one market, China. Global investors will not tolerate its meagre profits for ever; some are already grousing. * * * Lenovo has managed to get to the top of the PC mountain at precisely the moment when the mountain appears to be crumbling. Industry sales are shrinking as PCs are made obsolete by other devices. HP has even mooted quitting the business altogether. Some say Lenovo’s costly global expansion will end in tears. Mr Yang disagrees. Indeed, he shows an unfashionable faith in PCs, which are still 85% of Lenovo’s revenues.

"He also thinks Lenovo has a secret weapon. It has kept a lot of manufacturing in-house (why outsource to Foxconn when you already pay Chinese wages?). Mr Yang believes this in-house expertise gives his firm an edge in product development.

Note: Press releases:
(1) Soft PC Shipments in Fourth Quarter Lead to Annual Decline as HP Holds Onto Top Spot, According to IDC. IDC, Jan 10, 2013
http://www.idc.com/getdoc.jsp?containerId=prUS23903013
(4Q12: HP 15,023,000 vs Lenovo 14,105,000)
(2) Gartner Says Declining Worldwide PC Shipments in Fourth Quarter of 2012 Signal Structural Shift of PC Market; Global PC Shipments Declined 4.9 Percent in Fourth Quarter. Gartner, Jan 14, 2013
https://www.gartner.com/it/page.jsp?id=2301715
(4Q12: HP 14,645,041 vs 13,976,668)
(3) In October, Gartner but not IDC said Lenovo beat HP in 3Q12, by a hair.

Gartner Says Worldwide PC Shipments Declined 8 Percent in Third Quarter of 2012 as the Market Prepares for the Launch of Windows 8; Lenovo Takes Slight Lead Over HP for No. 1 Global Position. Gartner, Oct 10, 2012
http://www.gartner.com/it/page.jsp?id=2194017
(3Q12: Lenovo 13,767,976 vs HP 13,550,761)

(to be continued)

choi

Other PC makers' stories, while worthwhile, do not merit your attention. So I decide against them.

Rolfe Winkler, Intel's Higher Spending May Not Compute. Wall Street Journal, Jan 18, 2012 (in the half page Heard on the Street).
http://online.wsj.com/article/SB ... 49870966211566.html

Quote:

"The declining PC business—the biggest end market for Intel's chips—hit the company's results, as expected, in the fourth quarter. PC revenue dropped 6% from the prior year, driving a 3% overall top-line decline. What spooked investors, and sent the stock reeling 6.3% on Friday, was an unexpected jump in Intel's forecast for capital expenditures.

"The problem is that if the PC business is just starting a longer downtrend, not simply suffering a temporary hiccup, then the return on Intel's higher capital investments might be low.

"the bigger concern remains the long-term profitability of Intel's business. While the company's chips are finally being designed into more mobile devices, they still aren't found in any that are shipping in meaningful volumes.

choi

Chip Makers Forecast a Slowdown in Orders; Similar difficulties for Texas Instruments and AMD. New York Times, Jan 23, 2013

Quote:

(a) paragraphs 1: "Texas Instruments and Advanced Micro Devices posted quarterly results on Tuesday [Jan 22] that topped analysts' estimates but warned of a rocky period ahead as mobile devices gained traction with consumers at the expense of personal computers.

(b) "AMD and Intel were both caught flat-footed in recent years with the emergence and fast growth of mobile devixces, which led to an unexpected slump in the PC industry.

"While Intel has deep pockets to finance research on new processors to catch up in tablets and smartphones, AMD faces declining cash flows and a more modest balance sheet.

My comment:
(a) The byline is "Reuters," which does not appear to have the report. It se3ems to me that NYT merges at least two Reuters reports (about TI and AMD separately) into one.
(b) There is no need to read the rest.