Lenovo Group Ltd is about to settle a year-old class action lawsuit over laptop malfunctions in the United States for approximately $70 million.
The large settlement should be "a lesson" for Lenovo as the Chinese personal computer giant prepares to take on Apple Inc, a leading industry analyst said on condition of anonymity.
Lenovo will spend about $49 million to repair 83,000 Lenovo IdeaPad laptops sold in the US, as well as about $20 million in cash refunds and credit to settle a 2013 suit involving the company's ultrabook products, according to a document released by the US District Court for the Central District of California.
In February 2013, Garrett Kacsuta, who owned a Lenovo IdeaPad, filed a suit against Lenovo's US subsidiary because of "a design defect that affected the WiFi component of the computers", the document showed.
"The final settlement fee has not been decided as the process is not complete. The court is yet to approve the settlement amount," Lenovo said in a statement on Wednesday.
Antonio Wang, research director at industry consultancy IDC, said Lenovo can use the incident to build a stronger brand image as a responsible company.
"It is a good time for Lenovo to improve product quality and after-sale services outside China," he said.
The US PC market, which is slowly recovering from its deepest slump in history, is Lenovo's key target for growth in the coming years.
The US market grew 6.9 percent year-on-year in the second quarter of 2014, according to IDC. "Continuing upgrades of Windows XP systems boosted shipments in commercial portables and desktops, helping the commercial segment," it said.
Lenovo'sAmericas business achieved a record PC market share of 12.5 percent in the second quarter of this year, up 3 percentage points year-over-year, according to the company. Its market share in the US increased to 11.3 percent, up by 1.5 percentage points from a year earlier.
"The sales damage to Lenovo will be limited because the company's primary product line in the sector is the ThinkPad series," said Wang.
The core development team of the Lenovo laptop unit was acquired from IBM Corp in late 2004.
Lenovo is the world's largest PC maker in terms of annual shipments. In the second quarter, it shipped 14.5 million PCs, including desktops and laptop devices.
Second-ranked Hewlett-Packard Co shipped nearly 1 million fewer units than the Chinese company.
Lenovo is also trying to build a bigger product range and improve its profitability. It is carrying out two major acquisitions in the server and smartphone markets.
Both deals are likely to be closed by year-end, company executives said.
A customer checks out a Lenovo tablet at a shopping center in Hong Kong. Lenovo will spend about $49 million to repair 83,000 IdeaPad laptops sold in the United States. Reuters
(China Daily08/28/2014 page13)