Brazil: Lenovo to acquire companies and hire employees for building PC facilities.

WorldWide Tech & Science. Francisco De Jesùs.

Brazil: Lenovo to acquire companies and hire employees for building PC facilities.

Lenovo’s Asia-Pacific and Latin America president, Milko Van Duijl, told Dow Jones in an interview that the PC maker is looking to set up a permanent shop in Brazil in a bid to lower import costs and produce PCs locally. The move could see thousands of local workers employed by the company.

Van Duijl said in regards to acquisitions: “We are interested in buying or working with all the players, though we are not singling out any one of them.” 

The news comes from Hong Kong:  Lenovo Group Ltd. is keen on acquisitions in Brazil as the Chinese personal computer maker looks to boost its market share in key emerging markets other than China where it is already the biggest supplier of PCs by shipments.

The world's second-largest PC maker after Hewlett-Packard Co. is also currently evaluating a plan to set up a manufacturing base in Brazil so that it can produce PCs locally and avoid high import tariffs, Lenovo's president of Asia-Pacific and Latin America, Milko Van Duijl, told Dow Jones Newswires in a recent interview.

"We are interested in buying or working with all the players (in Brazil), though we are not singling out any one of them," when it comes to acquisitions, Van Duijl said.

He also said that the company cannot be competitive in Brazil without a local manufacturing base. "When you have to add (taxes) to your cost in a PC business where margins are very small, there is no chance in life to be successful."

The executive's comments came amid growing concerns over a slowdown in China's economic growth. Lenovo, the biggest player in China's PC market with a 30% share, has been redoubling efforts to expand in other emerging markets such as India, Indonesia, Brazil, Argentina and Mexico, where demand is expected to rise among consumers buying PCs for the first time.

Lenovo said it became the No. 1 PC brand in India for the first time in the quarter that ended in March, with a 15.8% share. The company sees room for growth in Latin America, where its presence remains relatively small. In Brazil, Lenovo is the No. 9 player with a market share of 3.6% at the end of March, and the business currently is not profitable.

Van Duijl noted that Brazil has recently overtaken Japan to become the world's third largest market for PCs after China and the U.S. in terms of shipments.

Lenovo has been outperforming rivals in the global PC market even though demand for traditional PCs has been sluggish compared with the growing popularity of mobile Internet devices such as smartphones and tablet computers. Lenovo's PC shipments in China rose 23% in the quarter, while shipments in other emerging markets jumped 50%. Despite the tough macroeconomic climate, the company's worldwide PC shipments rose 44% in the quarter ended March 31, compared with 5% industrywide growth.

In the quarter, Lenovo's net profit rose 59% from a year earlier to $67 million, while revenue rose 54% to $7.5 billion, drawing a stark contrast to profit declines at H-P and rival Dell Inc. 

Over the past few years, Lenovo, which acquired International Business Machines Corp.'s (IBM) PC business in 2005, has grown through acquisitions. The company effectively took control of the PC business of Japan's NEC Corp. (6701.TO) last year by taking a 51% stake in their joint venture, investing $175 million. Lenovo's market share in Japan, including the portion held by the joint venture with NEC, stood at 25.2% in the quarter that ended March, compared with less than 10% before the tie-up with NEC.

Last year, Lenovo also acquired a majority stake in German computer and consumer electronics maker Medion AG in a cash and stock deal valued at up to EUR465 million.

While seeking growth without acquisitions remains an option in Brazil, "it takes longer to set it all up," Van Duijl conceded. "Particularly in those kind of markets, you need to look at whether you do it yourself or you do it with others."

Van Duijl said that Lenovo will continue to focus primarily on PCs for growth in emerging markets such as Brazil, even though the company has been diversifying its offerings in China to sell smartphones, tablet computers as well as smart televisions with Internet capabilities. Lenovo plans to spend about $800 million on a new facility in the central Chinese city of Wuhan to develop and produce smartphones and tablets.

In those new product categories, "we believe that we need to become the No. 1 player in China first," Van Duijl said. He added that Lenovo can do so by leveraging its brand value and reputation in the Chinese market.

"When that goes well, you can take your products outside China with much higher success rates."