Tough times strike Lenovo’s data center business

Partners and customers are losing faith in Lenovo’s server business, if they ever had it.

Tough times strike Lenovo’s data center business
Michael Kan/IDGNS

Lenovo has done a bang-up job in taking over IBM’s old PC business and turning it into a rousing success. Or at least as much of a success as can be had in an era of declining PC sales. Its luck with the server business? Not so much.

Lenovo picked up IBM’s x86 server business in 2014 after some grumbling and consternation from the government. It seemed the government and military had quite an installed base of IBM servers and wasn’t keen on the Chinese taking ownership of them. But the deal went through after some assurances. Looks like that was the least of their problems. 

According to Gartner, in the first quarter of 2017, Lenovo sales fell 16 percent and its market share dropped to just 5.8 percent. Lenovo was fifth, behind HPE, Dell EMC, IBM (which is only selling Power-based RISC systems and mainframes) and Cisco. In fact, Lenovo had been ahead of Cisco in terms of units sold. When you fall behind Cisco in servers, a business Cisco didn’t even enter until a decade ago, you have a problem. 

Now partners are expressing concern over the departure of the company’s North American president Emilio Ghilardi after just 18 months on the job. It should be noted that Ghilardi was in charge of the PC and laptop group. Leadership of its Data Center group remains unaffected.

At least by the departure of Ghilardi. It still has a bit of an image problem that the group’s leadership must address. Ron Venzin, partner at Focal Point Solutions Group, summed it up with this comment to CRN: “When customers look at Lenovo, they see desktops and laptops. They don’t look at Lenovo in the data center.”

Even more damning was this comment from a solution provider: “When I lay out OEM partnerships, when I mention Lenovo, the customer says, 'No, I don't want anything to do with that. They're a Chinese company.' The Chinese are known for reverse engineering technology. It's purely political." 

How does Lenovo, with its massive U.S. office in North Carolina, overcome that? 

Lenovo tries to turn things around

That’s not to say Lenovo isn’t trying. In June, it introduced 26 data center hardware products, covering servers, storage and network switches as part of two brand launches, ThinkSystem and ThinkAgile. The company has also introduced new software-defined infrastructure and struck a deal with SAP to run HANA applications on Lenovo hardware. 

Also, Lenovo scored a big get when it hired Kirk Skaugen to be president of its data center unit. Skaugen was a heavy-hitter at Intel and might have been a contender for the CEO position. He did great things with the data center group, although he was also just selling chips, not systems. Lenovo also hired former Intel CIO Kim Stevenson to be general manager of the data center unit.

For now, Christian Teismann, senior vice president and general manager of its enterprise business segment, will serve as an interim chief until a replacement is found for Ghilardi.

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Copyright © 2017 IDG Communications, Inc.

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