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By Bloomberg

Lenovo Group Ltd. expects the integration of International Business Machines Corp.’s low-end server unit to help the personal-computer maker cut manufacturing costs within the next year.

Similarities between product development, the supply chain and manufacturing will allow greater efficiency at both divisions, President-designate and Chief Operating Officer Gianfranco Lanci said in an interview Wednesday. He said he couldn’t provide a figure for such savings yet.

Lanci, 60, was named president effective April 1 in a reorganization announced this month. Lanci, who runs Lenovo’s profitable PC business, also will take charge of the enterprise business. The costs from acquisitions to push into new products such as servers caused Lenovo’s net income to fall 4.6 percent to $253 million in the quarter ended December.

“We’re in the process of working out what efficiencies we can gain and what benefits we can achieve on manufacturing and component costs,” Lanci said. “We’re not in a position to quantify it today, but it’s going to be quite big.”

Lanci joined Lenovo in April 2012 and has more than 30 years’ experience in the PC business, including as CEO of Taiwan’s Acer Inc. from 2008 to 2011.

Acquisitions Push

Chief Executive Officer Yang Yuanqing is expanding the reach of Lenovo, the world’s largest maker of PCs, into servers and smartphones amid a global slump in demand for computers. He bolstered the push with $5 billion in acquisitions last year, including the purchases of Motorola Mobility from Google Inc. and IBM’s server unit.

Gaining the added role of president, with most of the company’s sales heads reporting directly to him, means Lanci will be running the company’s daily operations, said Dan Baker, an analyst at Morningstar Inc. in Hong Kong.

“It’s just a case of best man for the role,” Baker said. “It looks like this move will free up more time for CEO Yang to focus on the strategic direction.”

Shares of Lenovo have climbed 13 percent this year in Hong Kong trading, while the city’s benchmark Hang Seng Index has gained 3.9 percent.

The two business groups that don’t report to Lanci, the mobile unit and cloud services business, will remain under Yang.

Keeping smartphone growth on track is key for Lenovo as worldwide PC shipments are forecast to fall 4.9 percent to 293.1 million units this year, according to researcher International Data Corp.

‘Future Growth’

“Lenovo needs a strong PC business to drive earnings in the next two years, and Lanci is the right person,” said Kirk Yang, an analyst at Barclays Plc in Hong Kong. “The future growth is from non-PC business -- like smartphones, servers, cloud, e-commerce -- where Chairman Yang should focus more.”

The Motorola purchase, completed in October, helped Lenovo boost global smartphone shipments 78 percent in the fourth quarter to 24.7 million units, IDC said Jan. 29. Its market share expanded to 6.6 percent from 4.8 percent a year earlier, according to the researcher.

Lenovo trailed only Samsung Electronics Co. and Apple Inc. in shipments, according to IDC.

Lenovo in January reintroduced the Motorola brand in China, the world’s biggest smartphone market, after a two-year absence. Lenovo also will start a new online smart-devices unit called ShenQi next month that would use a direct-to-consumer, Internet- based business model similar to that of closely held Xiaomi Corp.

HP, Dell

Lenovo’s other big transaction last year, IBM’s low-end server unit, is part of the enterprise group that will come under Lanci. The IBM transaction made Lenovo the third-largest server vendor in the world behind Hewlett-Packard Co. and Dell Inc. The server unit will hit $5 billion in sales within a year, with margins that will be better than the company’s PC unit, Yang said in February.

Integration of the server business is progressing “very smoothly,” and Lenovo can now capitalize on the acquisition and expand the business faster than before, Lanci said.

Lenovo “is giving more control to a manager who has had a very strong track record of success, at both Acer and now Lenovo, of executing well in a challenging PC market,” said Raul Barroso, a Hong Kong-based analyst with Cantor Fitzgerald. “He has shown an ability to take share profitably while continuing to bring new competitive products to market.”