Lenovo to Launch Low-Cost Business Desktops, Laptops

Hoping to grab a bigger slice of the U.S. small-business market, Lenovo Group will launch a line of low-cost desktops and laptops.

In a conference call with analysts Tuesday, the company said that it would announce its 3000-series computers to compete for market share in the SMB (small and medium-size business) market with established names such as Dell and Hewlett-Packard.

The move could yield lucrative results because SMBs account for about two-thirds of business PC sales worldwide, according to Simon Yates, an analyst at Forrester Research, Cambridge, Massachusetts.

First Lenovo-Only Products

The company faces a challenge in winning customers' trust because these are the first products launched under the Lenovo brand since the Chinese company bought the PC division of IBM in 2005. In December of that year, Lenovo announced plans to broaden its product offerings beyond IBM legacy products such as ThinkCentre desktops and ThinkPad notebooks. Those PCs are target high-end customers and are not designed to offer the wide range of configurations that small-business users expect, Yates said.

So the new move represents an effort by Lenovo to strike a balance between competing for new business on a price basis while preserving IBM's reputation as a premium-quality brand.

There will be plenty of competition. Analysts predict strong growth for the SMB market in 2006 and 2007, so even without the Lenovo move, big providers like Dell and HP will have to fend off entries from smaller firms like Acer, Sony, and Toshiba.

All of those providers must attempt to reconcile the different demands of the enterprise, SMB, and consumer markets.

Buying Differences

Compared to large-enterprise companies, SMB owners tend to buy in low volume instead of working out buying cycles with contracted discounts; and they are more willing to adopt new technologies and to switch vendors to get a better deal. At the same time, they demand equipment that works "out of the box," since they can't rely on large IT support staffs.

"As a result, the Lenovo 3000 series line is marketed as 'worry-free, great value, exciting/stylish' versus the Think messaging of 'rock-solid, lowest TCO [total cost of ownership], industrial-strength,'" Yates said.

Based in Purchase, New York, Lenovo already has strong penetration in the Chinese consumer PC market, and it sees its new products as a way to reach U.S. SMB and consumer buyers, said Richard Shim, a senior research analyst for IDC, in San Mateo, California.

Reliability will be the company's most important tool in reaching that goal.

"Consumers want the latest and greatest technologies, while SMBs rely on their computers for competitive reasons, not just entertainment. Consumers might accept some problems because it's for their personal use; but if it's your bread and butter, it had better work right out of the box," Shim said.

Lenovo designers could deliver the desired level of quality in new products by drawing on their existing technologies such as extended battery life and updated virus protection.