Windows 8 'convertibles' help Lenovo break into high-end PC market

IDG News Service - Lenovo's CEO said sales of its Windows 8 PCs have been "normal", neither surpassing nor falling behind expectations, but added that PC-tablet convertible devices using the OS are helping the company break into the high-end segment for the North American market.

"So in the past, we could only sell $299, $399 products. It's very hard to make money," said Yang Yuanqing on a Wednesday conference call. "That's the first time we not only had a presence in the high-end of the PC, but it also definitely helped us improve the margins."

Late last year, Lenovo launched both its IdeaPad Yoga 13 and ThinkPad Twist convertible PCs as part its lineup of Windows 8 devices. In North America, the products helped the company gain a 30 percent share of Windows 8 convertibles priced $700 and higher, it said in Wednesday's earning report.

Lenovo's CEO has been bullish on convertible PCs, and expects them to become more popular than tablets in the future. Although Windows 8 adoption will take time, Yang said the OS will make convertible PCs mainstream. "We are redefining this new category, we are leading this new category," he said.

Lenovo ranks fourth in market share in the U.S., at 8.5 percent, according to research firm IDC. But globally, the Chinese company is close to overtaking HP to become the world's largest PC vendor, and has consistently reported strong earnings despite the sluggish market.

Earlier this month, the company said it would reorganize its operations into two business groups. The "Lenovo Business Group" will develop mainstream products for consumer and commercial segments. The "Think Business Group", however, will focus on premium products, also for commercial and consumer segments.

Yang said this was done because the business models behind the high-end and mainstream products are different.

"You need to consider the quality and reliability first," he said of producing high-end devices that can be customized. The manufacturing of mainstream products, however, needs to account for speed and efficiency.

Outside of PCs, the company shipped 9.4 million smartphones in the fourth quarter, with 9 million of them for the Chinese market. It was the first time, the company's smartphone business in China has been profitable. Lenovo is also starting to sell handsets in emerging markets including Russia, India, Indonesia, Philippines and Vietnam.