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Lenovo looking at acquisitions to expand enterprise unit

Agam Shah | Dec. 5, 2013
Widely known as a PC maker, Lenovo wants to expand its server unit ouside of China.

Buyers want flexibility in choosing their data-center technology stack instead of being stuck with proprietary technologies, Guillen said. Lenovo has partnered with software makers like Oracle, EMC, Citrix, Red Hat and Microsoft, and also established a storage joint venture last year with EMC called LenovoEMC, which supplies parts bundled with Lenovo's servers.

At the same time, the company is "open to any technologies that drive customer value," Guillen said, saying that integrated server offerings is on that list.

"In appropriate time we will be developing our portfolio in that area," Guillen said.

To expand outside China, Lenovo has invested US$100 million in a state-of-the-art software research and development center in Sao Paulo. It will be the company's first research and development center dedicated to software development for the Enterprise Product Group. The development center will focus on software for server management, storage management, cloud technologies and other tools. Outside of China, the company also has enterprise product design centers in the U.S. and Taiwan.

It also doesn't hurt to have a strong PC business, Guillen said. The ThinkPad brand and products opens the door for the company to have discussions with customers about enterprise products.

"Trusted relationships, years of being a valued supplier, they trust us," Guillen said.

But Lenovo has to build a reputation as a reliable server vendor and it faces competition from a bunch of smaller server makers such as Supermicro and Quanta, analysts said.

Lenovo's biggest challenge will be to quickly attain scale as there is a lot of volume in industry-standard x86 servers, said Patrick Moorhead, president and principal analyst at Moor Insights and Strategy.

"I could see a scenario where Lenovo could be a low-cost provider of the newest technology with good quality and an enterprise brand. Lenovo has a lot of work to do, but they have some very experienced enterprise veterans," Moorhead said.

Lenovo's products may not require the amount of support as integrated or dense servers from IBM, HP and Dell. But in rack servers, enterprise customers are looking for top quality and good service, which ThinkPads have delivered, Moorhead said.

"What Lenovo needs now is a cadre of enterprise testimonials saying that they trust Lenovo in servers," Moorhead said.

With the enterprise business, Lenovo is today where Dell was four to five years ago, said Charles King, principal analyst and Pund-IT.

"Dell did a similar transformation and said it was going to be an end-to-end computer vendor. People laughed at the time, but they are doing well now," King said.

Lenovo has a solid collection of x86 servers and is working closely with partners in networking and storage, particular EMC. The company is not an IBM or HP and has to build a reputation on support, but a flexible server approach is a good start, King said.

"Lenovo is going to have to pick its spot and go after them one after another," King said.

 

 

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