While its Western counterparts struggle to maintain their personal-computer market share amid lackluster demand in the U.S. and Europe, Chinese PC maker Lenovo Group Ltd., which bought International Business Machines Corp.'s PC business in 2005, is powering ahead.

 

Lenovo last month reported its fiscal first-quarter net profit jumped 30% from a year earlier to $141.4 million on a 35% increase in revenue to $8.01 billion. Amid signs that China's slowdown could be hurting the company's growth prospects, Lenovo has already been expanding in other emerging markets such as India, Indonesia, Brazil, Argentina and Mexico, where demand is expected to increase among first-time PC users.

 

Last week, the company reached a deal to buy CCE, a group of three Brazilian consumer-electronics makers, for $147 million in cash and stock. That will beef up Lenovo's presence in Brazil, where CCE makes personal computers, phones and TVs at its seven factories across Latin America's largest country.

 

The company is also diversifying, making smartphones, tablet computers and so-called smart TVs that enable consumers to surf the Internet and download apps and movies from their television sets. It is spending about $800 million on a new base to develop and produce mobile products. Yun-Hee Kim sat down with Milko van Duijl, Lenovo's president for Asia-Pacific and Latin America, to talk about the company's growth prospects and expansion plans. The following interview has been edited.

 

WSJ: There are signs that China's economy is slowing down. Given Lenovo's heavy presence in China, are you worried that the slowdown might impact your business?

 

Mr. van Duijl: We expect China's PC market to continue to grow faster than the world-wide market and stay as the largest PC market in the world. We expect PC margins in China to remain stable, and we are also focusing on driving up revenue and investments in mobile products and strengthening our profitability through expansion in areas like the server and storage business.

 

WSJ: Lenovo has grown very quickly over the past few years and acquisitions have been a key strategy. Are you looking at more acquisition targets?

 

Mr. van Duijl: In all markets, we're trying to see if it makes sense to grow faster by looking at companies we can team up with. That's in the PC market, but also outside of PCs, we're looking at everything that can strengthen our portfolio and value proposition.

 

WSJ: For acquisitions, which market or markets are attractive for Lenovo?

 

Mr. van Duijl: We're No. 1 in PCs in China and No. 1 in Japan [in terms of shipments]. We're No. 9 in Brazil. If you want to be No. 1 in the market, clearly you cannot be satisfied with No. 9. In Brazil, smart TVs are taking off massively and there's huge PC demand and low penetration. The average penetration in emerging markets for PCs is 16%, and in Brazil it's about 28%. I grew up in the Netherlands, and Philips was a big company. Your first transistor radio was from Philips, your little phone and TV and PC was Philips. We see that opportunity in several countries, including Brazil.

 

WSJ: What is your strategy when it comes to smartphone production? Currently, you focus on selling them in China but would you look at expanding overseas to grow your market share?

 

Mr. van Duijl: We believe we need to become the No. 1 player in China first. When that does well, you can take your products outside of China with a much higher success rate.

 

WSJ: What makes you believe that if you're successful in China, you can replicate that model overseas? China is a unique market.

 

Mr. van Duijl: You need to get four things right: strategy, execution, culture and structure.

 

WSJ: Samsung Electronics lost a big U.S. case in its patent litigation with Apple, which has raised concerns that those that rely on the Android operating system might become more vulnerable in the future to potential litigation. What is Lenovo's software strategy?

 

Mr. van Duijl: If Google starts charging for Android, the competitive landscape wouldn't change as it would have to charge everyone.

 

We have a few initiatives around software, solutions and applications including Lenovo's enterprise app shop, developer program -- which supports software developers world-wide to create a catalog of apps for Lenovo's devices designed for Microsoft's Windows 8 operating software -- and cloud-computing initiatives where we aim to create an ecosystem that supports smartphones, tablets, PCs, and smart TVs.

 

WSJ: Internet TV is the next battleground for many technology companies. Lenovo makes smart TVs but there isn't a dominating operating system for televisions yet. Have you considered developing your own software for TVs?

 

Mr. van Duijl: For our phones, we had our own operating system in China. It was a modified version of Android called LeOS. We don't have plans to develop our own, and we plan to stick with Android.