Lenovo has emerging market edge

Global technology spending is weakening faster than expected.

Global technology spending is weakening faster than expected.

HONG KONG - With home turf advantage in the world's biggest computer market and a foothold in major emerging economies, China's Lenovo Group is looking to turn market share into profit, heaping more pressure on US rivals Hewlett-Packard Co and Dell Inc.

Concern that global tech spending, particularly in the developed world, is weakening faster than expected has battered Dell shares and prompted HP to axe some 27,000 jobs.

To counter weakness in consumer spending in major cities in the world's second-largest economy, Lenovo is casting its net wider.

"We are seeing strong growth in smaller Chinese cities," Chairman and CEO Yang Yuanqing said this week, unveiling a 59 percent jump in quarterly net profit. He noted that personal computer penetration in China is still just 20-30 percent versus 99 percent in the United States.

China has been Lenovo's traditional stronghold, contributing 42 percent of group revenue and boasting the business's highest operating margins.

Lenovo has around a 30 percent share of the Chinese PC market, well ahead of Acer, Dell, Asustek and HP, all with single-digit market share, according to data from research firm IDC.

Lenovo sold 2,5 million PCs in China in January-March, according to IDC, and company data showed the average selling price across its products rose 1,5 percent from the previous quarter to $545.

In the fast growing tablet segment, its Lepad trails some way behind Apple Inc's iPad, but outsells Samsung Electronics' Galaxy Tab.

Analysts note that while Dell has focused on high-margin products, Lenovo has aimed for volume sales to gain market share.

The key for Lenovo, which has risen to the world's No.2 PC maker after its 2005 acquisition of IBM's PC business, is how to turn that market share into profit.