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Lenovo hopes to dominate Japan server, PC markets

Roderick Lappin, president of Lenovo Enterprise Solutions, tells the press on Thursday that the company will win a greater share of Japan's PC server market.

TOKYO -- The president of Lenovo Enterprise Solutions, the new Japan arm of China's Lenovo, told the press on Thursday that the company aims to expand its corporate business through focusing on both PC and server operations.     

     At a press conference to introduce the new company, President Roderick Lappin said that he was sure the company would be able to push up its PC server market share in Japan. His confidence is drawn from the fact that LES has acquired another tool to reinforce its business-oriented IT operations. On the previous day, LES's parent company announced the completion of its initial closing to acquire the U.S.-based IBM x86 server business for 2.1 billion dollars.

     According to research company IDC Japan, the IT market for domestic businesses is estimated to top 10 trillion yen ($91.1 billion) in 2014. PCs and servers are two major components of the enterprise system that processes data via the internet. Owning both PC and server operations is expected to bring a great benefit to a supplier, as it would enable it to satisfy IT needs almost single-handedly as well as becoming deeply involved the enterprise systems of each client. Customers often buy PCs and servers from a single supplier.

     Lenovo's cost competitiveness is already well known. Although PC prices are roughly half what they were a decade ago, Lenovo has been surviving by keeping costs as low as possible through economies of scale. In 2013, it became a share leader in the global PC market at 17.1%. Lenovo, which now sells 55 million PC units around the world every year, aims to reinforce its alliance with the newly-acquired PC server operation. According to an industry source, it is estimated that the company will be able to cut costs by another 10% or so by jointly procuring components.

     The acquisition combined with the new deal may bring about a reshuffle in share distributions among big rivals in Japan such as NEC, Fujitsu and Hitachi. This is because the deal is expected to enhance the Chinese company's price competitiveness and brand prestige. 

     However, there is also bad news for Lenovo in the Japanese market. Some of their PC server customers have cut IBM servers in favor of other suppliers since the U.S. IT giant's January announcement of the plan to sell the operation. Shipments for the three months through June slid by 18.7% on the year. Lenovo was the only player at home to suffer a decreased shipment.

     The decline was largely triggered by user concerns over the possibility of a decline in the company's ability to offer support for products. Many client companies place a great deal of importance on a supplier's readiness to provide support to overcome any troubles that arise. The service length of many PC servers is at least 3-5 years.

     To clearly show continued commitment to collaboration with other big IT companies, Lenovo invited officials from Microsoft Japan and Intel's Japan unit to Thursday's press meeting. The company also suggested that it is mulling the production of PC servers at the Yonezawa Plant in Yamagata Prefecture. This plant is run by NEC Personal Computers, a subsidiary of a joint venture between NEC and Lenovo specializing in PCs.

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