Lenovo Takes a Leap

With its low-cost angle, Lenovo is positioning itself to tap into the U.S. small-business segment, a lucrative market where some analysts believe there may be room for new players.

Whereas big corporate accounts are hard to penetrate, and the consumer PC business is fiercely competitive, small businesses represent an attractive market that the big players haven't already locked up, says Roger Kay, president of technology market research firm Endpoint Technologies.

Geographically dispersed and requiring some technical assistance along with their computer purchases, small businesses are often still served by local PC vendors dubbed "white box makers." And the sector offers nice profit margins, as small businesses aren't ordering enough units to qualify for volume discounts.

"It's not a slam dunk, but it's where you could say there is some opportunity," said Kay.

IBM couldn't make a go of it because its PC strategy was tied to the premium ThinkPad line, Kay notes. By leveraging its low-cost manufacturing capabilities, however, Lenovo is better equipped to compete on price and cater to small businesses.

While analysts don't see Lenovo's entry into the U.S. market as putting Dell's overall market share in serious jeopardy, it adds yet another complication for Dell, which has experienced a significant decline in its own growth rates recently. The Round Rock, Texas, computer maker is trying to boost sales in overseas markets like Asia. But the company may have to expend resources protecting its U.S. business, which is coming under increasing pressure from H-P, Taiwan's Acer, and now Lenovo.

"It makes Dell's life a lot harder," said Kay. "It doesn't mean they're going to lose, but they don't have as much room to maneuver as before."

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