Lenovo president EMEA: Two per cent margin for PCs is successful

The former Acer CEO talks about a possible acquisition of BlackBerry and riding out a tough PC market

A two per cent profit margin is 'success' for a PC manufacturer, according to Lenovo's president of EMEA, Gianfranco Lanci.

"Worldwide we're running at around two to 2.5 per cent in profits and in EMEA we're at around 2.5 to three per cent. In the last quarter we were also profitable on smartphones and tablets which was an area that we weren't profiting from for a few years. We plan to grow from 2 and 2.5 per cent profits to 3 to 3.5 per cent profits in the next 12 to 18 months," he said.

Lanci is the former CEO and president of Taiwanese firm Acer, and is now focusing all of his efforts on what is deemed by research firm IDC as the second largest PC company in the world, Lenovo.

His relationship with his ex-employer deteriorated over several months leading to Lanci resigning in March 2011.

"On the company's future development, Lanci held different views from a majority of the board members and could not reach a consensus following several months' of dialogues," Acer said at the time.

Last year, it was announced that Acer would take legal action against its former CEO for breaching a non-compete clause in his contract, by joining Lenovo as a consultant in September.

But amid troubles with his past employer, Lanci is keen to exert his leadership qualities at his current firm.

Riding out the tough times

Unlike most PC makers in the current climate, Lenovo has managed to increase sales, by 8.2 per cent in the fourth quarter of 2012. It succeeds by focusing on growing emerging markets and using aggressive pricing, leaving it with razor thin margins.

Lanci stated that Lenovo's current target was to gain a higher market share of the smart devices market (PCs, tablets and smartphones), a market in which it is currently placed third after Samsung and Apple.

"We need to gain more market share in this area. The traditional PC makers are far behind us in this area for two reasons: one is clear prices but also in terms of innovation," Lanci claimed.

The former Acer chief believes that it is the way that Lenovo is run that gives it an edge, particularly its mix of cultures, presumably making a dig at his old firm for being "Taiwan centric".

Lenovo president EMEA: Two per cent margin for PCs is successful

The former Acer CEO talks about a possible acquisition of BlackBerry and riding out a tough PC market

"This company is run as an able company, with people coming from different experiences and cultures. If you compare this to most of our competitors, they are either US-centric, Asia-centric or Taiwan-centric, and this makes a big difference as you need people aware of mature markets and emerging markets. There are global people from different regions working at Lenovo - we are the only company when you look at our executive committee that has several different nationalities," he said.

Lanci said that about 85 per cent of the firm's revenue comes from PCs, with only 11 per cent coming from what it calls the mobile internet and digital home (MIDH) area.

This is something that it would like to build on, and Lanci believes the firm has an advantage over the likes of HP, Dell and Acer because of it has already started selling smartphones.

"We have a very big advantage in terms of scale, we sold nine million smartphones - yes we started only with China but now it can be anywhere else. If our traditional PC competitors were to get into the consumer area it would take them a long time to have the level of knowledge of products," he said.

He went on to state that Dell "may have some good reason" to go private, suggesting that "they may be focusing in on certain areas which are not affordable [prior to going private] due to shareholders' requirements".

Acquiring BlackBerry

One way of growing the firm's ambitions in the smart connected devices area is through acquisitions, with the CFO of Lenovo Wong Wai Ming stating that BlackBerry (formerly RIM) could be of interest.

And while Lanci claims that this was just "speculation", he explained that if BlackBerry, or indeed any other firm, fitted the Chinese firm's requirements, it would be looked into.

"We look at organic growth mainly but we are always open to inorganic growth; if we see an acquisition of potential value, whether it is in terms of the products they offer or the geographical coverage they hold, it must be complementary to what we already have," he said.

Another area that Lenovo is investing in is storage, particularly with its joint venture with EMC.

"We are going to speed up growth in that joint venture. Element one is to address SMEs on servers and storage, and the other is that we build up research and development with EMC in order to develop new products. Then we'll be working on storage development with EMC – it depends what we decide to do region by region," he said.

In terms of overall growth regions, for PCs, MIDH and storage, Lanci said that Russia, Eastern Europe, Africa and the UK were all key areas.

But Lanci was quick to switch back to talk of mobile and tablets, pointing out that Lenovo is one of the only vendors to have both a Windows 8 tablet and an Android tablet.

Ironically, his former employer Acer felt that smartphones and tablets were an area that Lanci did not concentrate hard enough on in his time there.