Photo: Chris Lauretano / Flickr

Proving that there’s still life – and growth – left in the PC industry, fast-growing Chinese PC manufacturer Lenovo has seen its Q3 profits shoot up an impressive 25 per cent. This continued growth will no doubt put pressure on the three PC manufacturers ahead of the company as Lenovo looks to dominate the industry.

Expectation beating

The world’s fourth biggest PC manufacturer by volume beat analyst’s expectations by posting net profit in the third quarter, reports Reuters. These are the company’s best results in over two years, helped notably by a stronger Chinese currency, as well as lower component costs, resulting in better margins on Lenovo PCs.

This growth resulted in Lenovo posting net profit of $99.65 million over the October-December quarter, up over $20 million dollars when compared to the same period the year prior. What mattered most, though, was that this beat median analysts’ expectations of $86.2 million net profit, as polled by Reuters.

Roadmap

The Chinese PC manufacturer, like most every other major PC manufacturer, is working on its own tablet PC and ultra-portable laptops to complement its desktop line. The company finds itself in a fast-changing PC landscape, where the once formidable netbook is in rapid decline, smartphones and tablet PCs are growing at a meteoric pace, and traditional laptops and desktop sales are slowing.

A strange move

Where Lenovo is departing from the path everyone else is taking is in its decision to launch a video game console. True story. The company is developing the Lenovo eBox gaming console for the Chinese market.

While it’s unclear how this move will benefit Lenovo’s bottom line, other console manufacturers like Sony, Nintendo and Microsoft hope this will open the doors to launching video game consoles in the gaming averse region. The Chinese government has long been resistant to gaming consoles, citing the negative effects they will have on ‘the youth’. It would be symbolic for a Chinese PC manufacturer to open the doors for others.

Photo: Lenovo

Chinese computer manufacturer Lenovo is reportedly developing a games console it plans to launch in its notoriously difficult local gaming market. Cue the laugh track, for this move is either pure genius or absolutely suicidal.

Cracking a tough nut

Reuters reports that Lenovo, the fourth biggest PC manufacturer (if you exclude monsieur iPad) has dedicated 40 of its engineers to working in step with Beijing eedoo Technology to build and market the ‘eBox’ game console. The undisclosed investment is provided by Lenovo, its parent company Legend Holding, and the organisation’s private equity wing, Legend Capital.

This is in a move to, firstly, diversify away from their core, highly commoditised computer sales business and explore other avenues for generating revenue. But Lenovo gaming isn’t the way I would have expected them to do this.

Suicide pill?

Console manufacturers have tried and failed for years in the Chinese market due to rampant, unmitigated, buy-an-illegal-copy-in-a-store levels of piracy. The piracy factor alone makes it unfeasible to move into the market because console manufacturers rely on the sales of games to break even, let alone make a profit. Why would the eBox be any different?

Photo: ag2r / Flickr

Lenovo gaming clearly thinks it can buck the trend and make money off this. The rational mind says they’re crazy.

Masterstroke?

However, Lenovo is no stranger to long shots. The company came out of nowhere to become a considerable force in the PC industry in the last decade, and clearly has experience selling to the Chinese market. If the company has a retail strategy that would mitigate or completely stop piracy – unlikely, but you never know – it could well have a hit product on its hands with this Lenovo gaming strategy.

What do you make of this strategy? Can the eBox work? Or are we right to think Lenovo is committing strategic suicide?