Lenovo (00992.HK) grew a meager 5 percent in its core personal computer business in 2014, disappointing many investors.
Chief financial officer Wong Wai-ming admitted it is quite hard for the PC business to keep growing at a 10 to 20 percent clip annually like before.
Lenovo’s recent collaboration with Alibaba in the smart TV market was widely interpreted as an attempt by the PC giant to capture other sources of growth.
But a few industry players and experts said the effort might be too little too late.
Last month, Lenovo rolled out 17TV, its first smart TV brand.
The 55-inch 4K-resolution TV uses Alibaba’s Yun operating system. It’s priced at 3,999 yuan (US$645) on e-shopping platform Tmall.
Reports said 17TV has been well received by the market but whether the business will make a profit remains to be seen.
China’s traditional TV market is already saturated and profit margins have been under pressure in recent years.
In order to survive, manufacturers have teamed up with internet companies to produce smart TVs where competition is quickly heating up.
Almost all the big names are already in the game.
Tencent (00700.HK) partnered with Skyworth (00751.HK) in 2013 to launch WeChat TV.
Last year, Baidu and its iQiyi platform joined hands with TCL Multimedia Technology (01070.HK) to produce internet TV.
Compared with traditional TV makers, Lenovo may find it hard to compete. The former benefit from scale and control the supply chain.
Against rivals such as LeTV, which has a strong content line-up, the Lenovo-Alibaba venture has no clear advantage either.
By bundling content with the hardware, LeTV has been able to sell its smart TV at low prices while making up the difference from content sales.
With hardware alone, LeTV is selling smart TV at a loss, according to Sunny Yan, director of corporate Finance of TCL Corp.
Lenovo and Alibaba lack LeTV’s content advantage to copy the latter’s business strategy.
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