Lenovo marks five years in IBM split

It didn't end up buying Palm but Chinese PC maker says it's riding high and focused on "game-changing plays" in mobile Internet and digital home entertainment, five years after buying IBM's PC business.
Written by Eileen Yu, Senior Contributing Editor

Lenovo says its product strategy is now focused on "game-changing plays" in mobile Internet and digital home entertainment, five years after the Chinese computer maker completed its acquisition of IBM's PC business on May 1, 2005.

When news first broke that a Chinese company virtually unknown outside its domestic market had bought IBM's PC business, industry watchers and players were doubtful the merger would prove fruitful. iSuppli analyst Joe D'Elia said then: "This is going to be a bigger challenge than both companies think. You are talking about a company (Lenovo) that has no experience internationally. They are very shrewd but they are only used to dealing in the Chinese market."

Michael Dell, CEO of rival Dell Computer, also taunted: "We're not a big fan of the idea of taking companies and smashing them together. When was the last time you saw a successful acquisition or merger in the computer industry? It hasn't happened in a long, long time...I don't see this [IBM-Lenovo merger] as being all that different."

Five years on, Lenovo is now the world's fourth largest PC maker and posted the fastest growth among the top five global PC companies for the first quarter of 2010, according to Howie Lau, Lenovo's Asean vice president and general manager.

In an e-mail interview with ZDNet Asia, he said the company's performance is "the best indicator" it has proved its critics wrong.

Lau said Lenovo has been able to stay competitive by focusing its organizational structure on an "effective business model" and "lean cost structure", and beefing up its global presence through various branding initiatives.

Q: The industry at large was skeptical when news first broke that IBM sold its PC unit to a Chinese brand that was virtually unknown outside its domestic market. An analyst also noted that Lenovo has been "a bit slow" to respond to some market trends, specifically in the consumer space. What did Lenovo do over the past five years to address these concerns?
Lau: Since acquiring IBM's PC division, Lenovo has become the world's fourth largest PC manufacturer. Our market share has reached a record-high three quarters in a row, and we posted the fastest growth among the top five global PC companies for the first quarter of 2010, according to IDC.

In the Asia-Pacific region, Lenovo continues to be the No. 1 PC vendor in unit shipments for eight consecutive years since 2002 and IDC also estimates Lenovo's growth in the first quarter of 2010 at 61 percent, surpassing the industry growth of 38 percent.

In efforts to raise Lenovo's brand visibility outside of China, we supported global events such as the Olympic Games where we were the sole hardware provider. We also partnered global properties such as the National Basketball Association and Formula One. We're also partnering the Vodafone McLaren Mercedes team for the 2010 F1 season, where our notebook and desktop PCs are deployed in the team's mission-critical computing systems, both at the race track and at the team's U.K. headquarters.

To address the consumer market, we launched our Idea brand in 2007 and that has since grown into a global business spanning 76 countries, with a product line comprising notebooks, desktops, netbooks, all-in-ones, nettops, digital home devices and accessories.

The company went through several major staff and organizational restructuring in the past year, including layoffs in January 2009, the resignation of former CEO William Amelio in February, and the merging of the "RIC" emerging markets as one unit. Can you discuss why the restructuring was necessary and how these have panned out today?
After Bill Amelio completed his three-year contract with the company, we came under the leadership of current CEO Yang Yuanqing who instituted the strategy to divide our markets into "mature", comprising Australia/New Zealand, Israel, Japan, North America and Western Europe, and "emerging markets", which encompass China, Asean, Africa (South and Central), Hong Kong/Taiwan/Korea, Russia/CIS, Turkey, Middle East/Egpyt/Pakistan, and Eastern Europe.

Emerging markets are typically at similar stages in their IT development and PC needs. They grow relatively faster with consumer and SMB (small and midsize business) as key segments, and present expansion opportunities beyond their metro areas. So a consumer in Indonesia actually has more in common in terms of PC usage, needs and price-points with someone in Turkey, rather than with someone in Japan.

By this same token, Asean was among the first few countries to launch Lenovo's consumer products and this experience helped Lenovo expand its consumer products worldwide.

This strategy not only enables Lenovo to better target customers, drive efficiency and generate stronger results, we were also able to quickly build a high level of user acceptance and trust by demonstrating relevance and an understanding of the markets' needs.

Lenovo also put in place a "protect and attack" strategy, where we protected our core businesses in China and global commercial markets and attacked key growth opportunities in emerging markets including the consumer and SMB segments.

HP's Palm buyout has now put an end to speculation over Lenovo's potential part in the saga. What are your views on HP's plans to develop WebOS on tablets, slates and potentially netbooks? Where, and how do you see Lenovo competing in the mobile device space with the likes of Apple (with the iPad) and now HP with Palm's WebOS?
Lenovo never made any announcement about Palm, and does not comment on rumors.

However, our view is that the mobile Internet segment will account for 10 to 20 percent of our revenues in five years.

At the CES show in Las Vegas earlier this year, we announced our first wave of mobile Internet products, including the hybrid notebook IdeaPad U1, and our first smartphone running on Google Android, the Lephone.

January marked the first time AMD chips were available in ThinkPads, which was reportedly a move that would allow Lenovo to offer lower price-points. Will price be the main strategy for Lenovo moving forward?
We reinvented the Think brand with the needs of a new audience in mind, the SMBs. We already offer customers a choice of AMD processors in ThinkCentre desktops and because SMB customers look for increased value and are more price sensitive than other types of business customers, we introduced AMD processors for ThinkPad Edge PCs.

Additionally, the ThinkPad X100e, an entry ultraportable laptop for businesses of any size, comes standard with AMD processors.

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