According to industry analysts, Lenovo may soon dethrone Hewlett-Packard (HP) as the world's largest PC maker by the beginning of next year if it continues to progress at its current pace.
Should Lenovo manage to grab the top spot, it would mark a major shift for a currently sluggish industry that has long seen HP reigning at the top of the PC business. Lenovo is currently the closest any PC maker has come to challenging the top spot from HP since the second quarter of 2008, when Dell climbed within 2.7 percentage points. Meanwhile, Lenovo's surge also highlights just how tough things have become for the once-undisputed king that has been at the top of the industry for such a long time.
"If the current trends for both companies continue, Lenovo should surpass HP in Q3 or Q4," said Pund-IT analyst Charles King, as cited by ComputerWorld. "On its face, it might not mean much to the industry. But Lenovo taking the top spot would be a huge boost for China's IT industry as proof they can play and win in the global big leagues."
For the last several years, Lenovo has seen a steady climb in ranking, racing among the world's top PC makers. Lenovo surpassed Dell in the third quarter of 2001, landing on the PC industry's second-place spot. The rapid surge to No. 2 was particularly impressive considering that as recent as the first quarter of 2011, Lenovo held the fourth position.
At the time, Gartner analysts explained that tougher competition in the enterprise PC market affected Dell and boosted Lenovo, noting that Lenovo's "aggressive marketing" in both the enterprise and consumer markets helped the company jump up the ranks. Earlier this week, however, a report from the same company showed that Lenovo is now within reach of Hewlett-Packard.
HP faced a global shipping decline of 12.1 percent in the second quarter of this year, and is now barely holding on to the top spot with 14.9 percent of the PC market. Lenovo follows closely with 14.7 percent.
"Lenovo has more than a good shot to overtake HP ion global PC sales," explained Dan Olds, an analyst with the Gabriel consulting Group, according to ComputerWorld. "They'll need a very solid third quarter, back-to-school selling season to do it this year, but I'd expect to see them sitting alone in the number one slot by the end of the first quarter 2013."
HP's problems, however, are not just due to the increased competition in the enterprise PC market. Back in August, company executives announced plans to spin off HP's PC manufacturing business. HP later reconsidered and kept the business after all, but the mere possibility shook the industry and sent the company on a rocky road.
Following this stir, Dell CEO Michael Dell said that HP created significant confusion in the industry with that announcement, and gave other PC manufacturers the perfect opportunity to sneak in. "The PC division has to have been hurt by the turmoil [caused by] HP's executives, especially since much of the rancor was over the future of HP's PCs," noted King. "I expect that uncertainty impacted the company's PC sales, though things should have calmed down by now."
In order to address the controversy and uncertainty it caused, HP would first of all have to reassure customers that its PC business is not going anywhere, said King. The company would also need to push product development to create new, more attractive products, and "pray, even sacrifice the occasional virgin for the success of Windows 8," added King.
Still, HP is struggling to re-establish its reputation and top position, and Lenovo is coming in on all fronts. Lenovo has ramped up manufacturing and design, increasing its ability to speed up innovation and take on competitors in bringing new products to the market. Meanwhile, most other major players are trying to reduce costs by outsourcing manufacturing and even design of their PCs, which further gives Lenovo a significant edge.
"Lenovo is leveraging its low overhead with refreshed industrial design to attack the consumer market and [is] picking up significant traction in emerging regions," said Moor Insights & Strategy analyst Patrick Moorhead, noting that HP needs to move fast if it wants to maintain its top position. "They need to reinvest in ground-breaking innovations they were recognized for a short five years ago to bolster their brand as a leading client PC brand."
