The U.S. PC market declined more than 10 percent in the third quarter, setting off a feeding frenzy among major vendors hungry for share and sensing Lenovo's blood in the water.
Statistics released recently by research firm Gartner Inc. clearly show a steep drop in U.S. PC shipments for Lenovo as the Beijing, China, manufacturer loses share to competitors HP Inc., Dell and Apple and moves to develop a channel strategy to counter broad market pressures.
Lenovo acknowledged recently that increasing memory and component costs had prompted it to adjust PC distribution pricing and cut back-end rebates in an attempt to keep prices stable for commercial customers and drive partners to sell more profitable, higher-end machines.
Partners told CRN that the changes would shave margins on Lenovo PC deals to razor-thin levels and push them toward competing vendors like HP Inc. and Dell. According to Gartner's statistics, though, that move may be underway already.
Lenovo's U.S. PC shipments fell more than 25 percent in the third quarter, the steepest year-over-year decline since its 2005 acquisition of IBM's PC business, Gartner said.
Lenovo's decline not only benefitted HP Inc. and Dell, but it also allowed Apple to overtake it as the third-largest PC firm in the U.S. market. Moreover, while all of the top manufacturers saw shipment declines in the quarter, none were nearly as deep as Lenovo's, and HP Inc., Dell and Apple all registered at least nominal share gains while Lenovo lost share, according to Gartner.
HP Inc. shipped 4.7 million PCs in the U.S. in the third quarter, keeping it firmly atop that market with a 31.6 percent market share. Dell was the second-biggest U.S. PC vendor during the quarter, shipping 3.8 million units during the period and commanding a 25.6 percent market share, according to Gartner.
Shipping 1.9 million units in the U.S. during the quarter was enough to give Apple a 12.8 percent share of the market and propel it beyond Lenovo, which shipped 1.8 million units, Gartner said.
Shipment totals for HP, Dell and Apple represent year-over-year declines of 2.7 percent, 5.6 percent and 7.6 percent respectively. Lenovo's total represented a year-over-year decline of 25.2 percent and was accompanied by a market share that slid to 12.2 percent from 14.7 percent a year earlier, Gartner said.
Conversely, HP, Dell and Apple each made small year-over-year market share gains, Gartner said.
Lenovo's weakness in the U.S. came alongside continued declines in the global PC market, where it registered its eighth decline in the last 10 quarters, and narrowly trailed HP Inc. for the worldwide market lead for the second consecutive quarter, according to Gartner. Lenovo had dominated the global PC market since 2013 but ceded the lead to HP earlier this year.
Stephen Monteros, vice president at Ontario, Calif., solution provider Sigmanet, said Lenovo has to dedicate more channel resources to partner development and emphasize "feet on the street in its programs" to regain a competitive posture with HP Inc. and Dell.
"We're seeing good channel engagement from Dell right now," Monteros said. "They've retrenched a bit after finishing the EMC acquisition, and they're partnering with us more. There's lots of sunshine coming out of the Dell camp. HP has been quieter, but seems to be doing pretty well."
Lenovo's program changes, Monteros said, were a necessary step to keep the company competitive, adding that he is optimistic about Lenovo's future in the U.S. market. "They had to make the changes to remain competitive, but when they decide to do something, they go at it with a vengeance," he said. "I'm bullish on them coming out of this strong."
To do that, Lenovo has to find a way into the minds and wallets of customers that can be set in their ways and drawn to products from Dell and HP that are often seen as the industry standard, Monteros said.
"Lenovo is strong with its convertibles; their configs are very flexible," Monteros said. "If the customers like this, you bring in those opportunities. HP is a very solid product, you know what you're going to get, and Dell is very similar. They have decent channel programs and good field reps. They're the corporate standard. As a solution provider, you have to define what the customer is looking for and find which vendor fits the bill, and then you live and die with that vendor."
"I may not be the norm," said Michael Goldstein, CEO of LAN Infotech, a Ft. Lauderdale, Fla., solution provider that works with several vendors, "but we're doing more with Lenovo than we ever did." Still, for as well as LAN Infotech does with Lenovo's X-Series PCs and Tiny workstations, customers gravitate toward Dell for several other products.
"Lenovo is definitely great for the road warriors," Goldstein said. "But we're successful with the Dell line for other things, like the Optiplex for standard desktop, and we definitely sell a lot of Precision workstations. When we're selling executives a desktop, the Latitude line has a really good docking station. It all depends on what they're looking for."