EMC deal spawns new Lenovo Enterprise Product Group

Lenovo has announced a new Enterprise Product Group to expand its server, storage, networking and software business for enterprises and channel partners. The move creates a formal entity to execute on an August agreement with EMC to jointly develop server technology. These as yet unannounced servers will be brought to market by Lenovo and embedded into selected EMC storage systems over time.

EMC and Lenovo also formed an OEM and reseller relationship in which Lenovo will provide EMC’s networked storage solutions to its customers, initially in China and expanding into other global markets to compliment the on-going development of its server business. The vendors also announced a new joint venture with EMC’s Iomega business to provide Network Attached Storage systems to SMB’s and distributed enterprise sites.

The new Enterprise Product Group will be led by Roy Guillen who joins Lenovo from Dell, where he was vice president and general manager of its data centre solutions business. Guillen’s role will include identifying new alliances and partnerships with the aim of carving out a slice of the global server market that is forecast to be worth US$40.6 by 2014 according to IDC.

Beau Skonieczny, an analyst with TBR, says the move into servers will drive margin expansion for Lenovo, but not in the short term. “Given the higher selling prices of server products over commodity PCs, a stronger global server presence will not only drive revenue growth for Lenovo, but will contribute to increased profit dollars that can be reinvested in its rapidly growing smartphone, tablet and smart television product lines.”

In Skonieczny’s view, it will take time and aggressive pricing for Lenovo to build scale in the global server space and take share from established players such as HP and Dell. Lenovo has been tight lipped about sales of its ThinkServer server products announced earlier in the year and is planning a refresh over the next three months. However, based on recent estimates from Gartner, Lenovo recently overtook HP as the as the world’s largest PC manufacturer based predominantly on strong sales in China.