Lenovo Group Ltd said costs will increase this year as the company begins selling computers under its own brand to grab share in the small-business market from larger rivals Dell Inc and Hewlett-Packard Co.
"There'll be an increase in marketing costs, but there's going to very little cannibalization" on our sales, Andrew Sotiropoulos, vice- president for Asia Pacific, said at a media briefing in Singapore on Monday. "We are driving more revenue through the increase in spending." Sotiropoulos declined to provide specific figures.
Lenovo, the world's third-biggest personal-computer maker, last week started selling its own-branded computers outside China to gain market share, the first time since buying International Business Machines Corp's (IBM) PC unit.
The Purchase, New York-based company is also building name recognition through an Olympic sponsorship until the 2008 Games in Beijing.
"Pushing into the consumer space is pricey, with costs associated with marketing and brand awareness," said Bryan Ma, a Singapore-based associate director at researcher IDC. "The challenge is compounded for Lenovo as it's not widely known outside of China."
IDC expects computer shipments in Asia's small-business market to gain 11 per cent annually until 2009, from an estimated 6.7 million units in 2006, Ma said.
Lenovo had a 4 per cent share of the small-business market in Asia in the 12 months ended September, Sotiropoulos said. Small businesses account for about 40 per cent of PC shipments in Asia, he said.
"You don't have to be a mathematical whiz to know that if we do well in the small-business segment, we do well overall," Sotiropoulos said in an interview.
Before February 23, Lenovo sold only products inherited from IBM, such as the ThinkPad notebook targeting large and mid-size businesses, outside of China.
"In its legacy as IBM, we did not do very well" in the small-business market, Sotiropoulos said. "For very practical reasons, we need and want to do better" in this market.
Lenovo bought IBM's PC unit for US$1.25 billion in May 2005 to stave off competition from Dell and Hewlett-Packard, the world's two largest PC makers.
Source: China Daily