China’s biggest computer-maker returns to its roots

IT WAS once seen as a model for Chinese firms eager to take on the world, but is now considered more of a cautionary tale. When Lenovo bought IBM’s ailing personal-computer (PC) division for $1.75 billion in 2005, it transformed itself from the biggest maker of PCs in China into the third-biggest PC-maker in the world and one of the most ubiquitous Chinese brands. But earlier this month the firm reported its third quarterly loss in a row, of $16m. It had lost a total of $361m in the previous two quarters. It is also losing market share: Taiwan’s Acer has surpassed it to become the world’s third-biggest computer-maker. Success in China, it seems, is no guarantee of success abroad.

Sluggish demand in America and Europe has hit Lenovo hard. Its sales in those markets fell by 17% in the most recent quarter compared with the same period last year. By contrast, Lenovo powered ahead in its home market. It shipped 15% more PCs than it did a year ago in mainland China, which accounted for 48% of its sales. Although the firm had pinned its hopes on international growth, it was China’s effort to boost domestic consumption through a massive fiscal stimulus that prevented a worse outcome. …