Lenovo, EMC enter JV

Lenovo Group Ltd, the world's second-largest PC maker, signed an agreement on Wednesday with EMC Corp to develop and sell server and storage technologies amid slowing growth in the consumer sector and strong demand for enterprise equipment.

Analysts believe the partnership will cement Lenovo's position in the server and storage sectors and give EMC, the US-based data-management company, greater access to the Chinese market.

Yang Yuanqing, chairman and CEO of Lenovo Group, announces its agreement with EMC Corp on Aut 1, 2012. The two companies aim to boost their data-storage business in China. [Photo/China Daily]

As part of the deal, the two companies will develop x86 industry-standard servers, which will be marketed by Lenovo, said Yang Yuanqing, Lenovo chairman and CEO. He did not release a schedule for the servers.

"Lenovo is good at manufacturing hardware. Although the making and marketing of enterprise equipment differs from consumer products, there is still a lot that we can adopt from our consumer PC team," Yang said.

"The partnership provides a boost that will help Lenovo develop x86 server products targeting the global market," said Bryan Wang, vice-president and principal analyst at Forrester Research Inc.

More than 90 percent of Lenovo's server business targets the Chinese market, said Wang, adding that Lenovo is looking to enter the global market with the new ThinkServer brand.

Lenovo accounted for 15 percent of China's server market in the second quarter.

Analysts said the partnership may suggest Lenovo is finding new growth businesses as the global consumer-PC market slows down.

The global PC market saw limited growth and had weak performance in the first quarter of this year, said an IDC report released in July. The report warned that the annual increase rate in the sector could hit a new low of 5 percent in 2012.

"There is no doubt that Lenovo expects its enterprise business to generate more profits, especially when growth of the PC sector slows," Wang said. "But it will take at least 18 month before its plans really start to boost sales."

"Although China's server market is not the biggest globally, the increase was prominent during the past two years," said Chen Xudong, Lenovo's China president.

EMC is also relying on Lenovo's strong sales network in China to accelerate its expansion.

"The relationship with Lenovo represents a powerful opportunity for EMC to significantly expand our presence in China and extend it to other parts of the world," said Joe Tucci, EMC chairman and CEO.

The deal also enables Lenovo to manufacture and resell EMC storage products. The sales will start on the Chinese mainland and then expand to other markets.

Lenovo was a newcomer in the data-storage industry, in which global players such as IBM and Oracle Corp have had established industrial supply chains for years.

"IBM's biggest customers are large conglomerates, but we set our target customer as the small and medium-sized enterprise, so there will be no direct competition anytime soon," said Yang.

gaoyuan@chinadaily.com.cn