Lenovo launches low-cost PCs for larger slice of SMB

In an effort to grab a bigger slice of the U.S. small-business market, Lenovo Group Ltd. is launching a line of low-cost desktops and laptops.

The company Wednesday debuted the Lenovo 3000 product line, the first Lenovo-branded desktops and notebooks to be offered worldwide, and the first to offer a choice of Intel Corp. or Advanced Micro Devices Inc. chips. The series includes the Lenovo C100 notebooks, priced starting at US$599, and the Lenovo J105 and J100 desktops, priced starting at $349 and $499 respectively.

In a conference call with analysts Tuesday, the company said the new line will compete for market share in the SMB (small and medium-size business) market with established names like Dell Inc. and Hewlett-Packard Co.

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

But the company faces a challenge in winning customers’ trust because this is the first product launched under the Lenovo brand since the Chinese company bought the PC division of IBM Corp. in 2005.

Those inherited products — ThinkCentre desktops and ThinkPad notebooks — are priced for high-end customers, and are not designed to offer the wide variety of configurations that small business users expect, Yates said.

So this move represents an effort by Lenovo to strike a balance between competing for new business on a price basis and still 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 Inc., Sony Corp. and Toshiba Corp.

All those providers must straddle a line between the different demands of the enterprise, SMB and consumer markets.

Compared to large enterprise companies’ buying cycles, SMB owners tend to buy in low volume instead of contracted discounts, are more willing to adopt new technologies and are happy to switch vendors to get a better deal. In return, they demand equipment that works “out of the box,” since they cannot 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, industrial-strength,'” Yates said. TCO means total cost of ownership.

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

Reliability will be their 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 that quality in new products by extending their existing technologies such as extending battery life and updating virus protection.

(Additional reporting by Marc Ferranti.)

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