Lenovo expects more PC industry consolidation

SHANGHAI Tue Dec 9, 2008 2:00pm EST

1 of 5. Lenovo's president and CEO William Amelio (R) poses with chairman Yang Yuanqing in front of a Forbes Magazine cover during a news conference in Shanghai December 9, 2008.

Credit: Reuters/Aly Song

SHANGHAI (Reuters) - Lenovo Group, the world's No. 4 personal computer maker, expects more consolidation in the PC industry in the current downturn but is open to acquisitions, its chief executive said on Tuesday.

Like its global rivals, Lenovo faces increasingly tough market conditions as businesses cut back on technology spending.

"There is no doubt in this economic situation that you will see consolidation of the PC industry," William Amelio told a news conference.

Profit margins at China's largest maker of personal computers, which competes with Hewlett-Packard, Dell Inc and Acer, have slid as intense competition in a global downturn takes its toll on business.

"In the course of the last several quarters, we saw first India slow down as a nation, then PC shipments as well, and Russia. Now China has slowed down significantly, and that has a big impact on our growth rate overall," Amelio said.

Last month, Lenovo posted a 78 percent drop in its second quarter net profit.

Amelio said the company's commercial business segment had been hit especially hard as companies cut back on technology spending.

But he expected things could improve next year as firms, eager to boost efficiencies, resume spending on technology.

For a graphic on PC makers' shares, double-click on: here

Asked about possible job cuts and restructuring of Lenovo in response to the economic slump, Amelio said: "All ideas are on the table," but he did not elaborate.

OPEN TO ACQUISITIONS

In spite of the global economic slowdown, Amelio said Lenovo would remain open to possible acquisitions to help drive growth.

In recent months, sources at Fujitsu Ltd said the Japanese company was in talks aimed at selling Fujitsu-Siemens's PC division to Lenovo, but keeping the server business.

Brazilian media have also reported on Lenovo's interest to take over Positivo Informatica SA, the country's biggest computer maker.

Amelio said he had no information on the widely publicized deals but was considering all opportunities.

"We are working diligently at everything and anything that allows us to be more efficient and effective."

Lenovo bought IBM's PC arm in 2005 for $1.25 billion, but lost to Asian rival Acer in efforts to buy Europe's Packard Bell last year.

Lenovo Chairman Yang Yuanqin, speaking at the same news conference, said the company would also continue investing in key growth areas such as emerging markets and its consumer business.

Yang said he remained optimistic that China's economy would continue growing by about 8 or 9 percent annually in the next few years.

Lenovo aims to grow faster than the industry average in coming years, he said without giving specific figures.

Lenovo's shares, traded in Hong Kong, have slumped 75 percent so far this year, underperforming a 47 percent fall in the benchmark Hang Seng Index during the same period. Its shares closed at HK$1.73 on Tuesday.

(Additional reporting by Jacqueline Wong; Editing by Andrew Torchia)

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