August 1, 2012 6:08 am

Lenovo seals partnership with EMC

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Pedestrians walk past a Lenovo store in China©Bloomberg

Lenovo, the world’s second-largest PC vendor by shipments, has taken its first significant step into the fast-growing server and storage market through a deal with EMC, a leading US-listed enterprise storage company.

Lenovo will resell EMC-networked storage products, make servers supported by EMC technology and acquire the enterprise storage-related assets of Iomega, a company EMC bought for $200m four years ago.

The deal marks the Chinese group’s latest challenge to Hewlett-Packard and Dell, which have seen the server and storage business as an area in which they could stay ahead of Asian rivals that have all but taken over leadership of the PC industry.

Lenovo said it initially plans to push servers and storage in its home market, China, where it already has a dominant position among small and medium-sized companies.

It would start targeting the North American market “in a year or two”, Peter Hortensius, president of Lenovo’s Product Group, told the Financial Times.

Lenovo accounted for 14.9 per cent of global PC shipments in the second quarter, breathing down the neck of HP on 15.5 per cent, according to IDC, the research group.

In the same period last year, Lenovo was ranked third behind HP and Dell with an 11.9 per cent market share.

IT companies see great potential in the servers and storage business, with growth in these segments driven by the expansion of cloud services.

Server revenues reached $56bn worldwide last year while storage revenues were $25bn, according to IDC. HP, IBM and Dell are the world’s three-largest server makers with a combined global market share of 72 per cent.

“We expect Lenovo to take market share from HP, IBM and Dell and become a leading vendor in the server space,” said Rod Mathews, senior director for new business development at EMC.

A person close to EMC said its partnership with Lenovo cleared the way for the Chinese company to now go after Dell in the servers and storage markets as well as in PCs, where Lenovo surpassed Dell for second rank among global PC makers last year.

Yang Yuanqing, Lenovo’s chief executive, last year identified servers as one of its next key areas of focus.

This year Lenovo launched its first server for small and medium-sized companies in the Chinese market, but it expects the EMC deal to help it forge ahead in the market for so-called volume servers.

These machines, which sell for less than $25,000, account for more than 60 per cent of the world server market and constitute its fastest-growing segment.

Lenovo and EMC said they would set up a joint venture, controlled by Lenovo, comprising the intellectual property rights and staff from Iomega’s commercial business.

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