May 1, 2006 4:00 AM PDT

One year later, Lenovo looks for second act

(continued from previous page)

The first time IBM approached Lenovo about a potential acquisition, management had declined. "They thought they weren't ready," Pan said. He joined the company three years ago in Bejing and worked closely with Lenovo's executives during the IBM negotiations in 2004. At the time of the first discussions, Lenovo was locked in the middle of a tough fight for market share in China and wanted to focus on shoring up its presence in its home country, he said.

But by 2004, Lenovo was looking for new places to grow. "Over that time, the management and business leaders became a lot more mature and could handle very complicated situations and understood the PC business a lot better," Pan said. IBM was still looking to offload its low-margin PC business, and the companies reconnected on what became a $1.75 billion deal.

"It's very natural, because a country goes through different stages. Korea and Japan...also encountered similar experiences when their companies tried to expand in the U.S."
--Paul Pan, Lenovo's director of strategy

IBM PC group executive Stephen Ward came over to run the newly merged company following the completion of the deal, but former Dell executive Bill Amelio was named to the top job in December, somewhat abruptly in the views of some analysts. Amelio was better equipped to lead the company's international growth, Lenovo said when it announced the deal.

Lenovo's largest move since the acquisition has been the introduction of the Lenovo 3000 series PCs, its first product designed for a global audience, as well as the first product jointly designed by IBM and Lenovo engineers. Those systems borrow some things from the design legacy of the ThinkPad, such as its keyboard, but employ less powerful configurations to focus on small- and medium-size businesses, Locker said.

To cater to those customer segments, Lenovo has also moved quickly to expand its distribution channels in the U.S., signing deals with Office Depot and Best Buy.

But the primary concern of many Lenovo watchers has been whether notoriously conservative enterprise IT managers would accept a change in their ThinkPad suppliers. The company has also had to deal with the U.S. government's concerns that Lenovo could pass intellectual property secrets to the Chinese government, which owns a 27 percent stake in the company.

Pan acknowledges that Lenovo faced more scrutiny as a Chinese company coming into U.S. corporate accounts than another U.S. company might have.

"It's very natural, because a country goes through different stages. Korea and Japan...also encountered similar experiences when their companies tried to expand in the U.S. The Chinese companies, especially the forerunners like Lenovo, have to experience similar situations and prove they can add value to our customers," Pan said.

Lenovo has lost a few customers because of this mindset, and its competitors did their share of trying to spread the FUD (fear, uncertainty, doubt) about their new overseas rival. But for the most part, Lenovo seems to have held onto its high-profile customers, Kay said.

That's probably because many of the personal relationships developed during the IBM days disappear under new management. Almost all the people who worked on the ThinkPad at IBM have moved to Lenovo since the acquisition, Locker said. "That's why it's not going to change."

To use a baseball analogy, while the company hasn't hit any major home runs in its first year as the world's third-largest PC company, it has cranked out a steady stream of singles. It hasn't dramatically expanded its market share, but it hasn't lost much ground, either. "Everything they've said they were going to do, they've executed," Bhavnani said.

Lenovo has also shown hardware companies in Europe and Asia that they can expand in the U.S. through an acquisition, Bhavnani said. Struggling PC vendor Gateway has come up as a potential acquisition target for companies like Fujitsu or some of the Taiwanese contract manufacturers that know how to design and build PCs, but don't have brand recognition in this country.

"Lenovo has set a model for how this could work. Fujitsu executives in Japan must be looking at this and saying, 'This can happen, it's doable,'" Bhavnani said.

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10 comments

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customers . . . balk at dealing with a Chinese company?
Absolutely. There may be a lot of difference between buying
chinese laptops from IBM and buying direct from Lenovo, but it's
the final straw.

We've bought our last Thinkpad.
Posted by rcrusoe (1305 comments )
Reply Link Flag
robinson crusoe, how apt
anyone outside of your society are savages, unworthy of you.
Posted by pjianwei (206 comments )
Link Flag
Bigot!
n/t
Posted by ddesy (4336 comments )
Link Flag
Lenovo: Terrible Customer Service - Recent Experience
I had to wait almost 6 months for a laptop from these fools. I was trying to audit Thinkpads against our current Dell Latitudes to see if we wanted to switch. Bad idea. After 6 months of "delay" emails, and two voice mails of assuring me "it's on it's way" I decided just to quit on them. When I finally talked to a Manager, he laughed, then apologized because he said, "I have never seen this before". His argument was "We have better machines". I could not believe it and will never deal with this company again. If we do decide to switch from Dell, it will not be to Lenovo.
Posted by ZeroJCF (51 comments )
Reply Link Flag
"I have never seen this before" ... yeah right
Anytime an individual receives bad customer service companies always respond by saying that their experience was an isolated event. Companies know they can get away with such statements because consumers have no way to aggregate their poor experiences to prove that in fact their experiences are not isolated. However, I recently have come across a new and free service that allows consumers to create authenticated records of their interactions with CS centers and also generate statistics on the quality of service that companies provide consumers. The name of the service is 321-CALL-LOG and their website is www.321calllog.com.

-james
Posted by jstaut (1 comment )
Link Flag
Yeah typical from Lenovo
This is certainly a pattern with them.
Posted by regularwhiteguy (1 comment )
Link Flag
Error correction
Kudos for making an in-story error correction prominent in the story header. Shows the advantage that internet news has over print.
Posted by sghanna (29 comments )
Reply Link Flag
bad experience with lenovo thinkpad
lenovo - bad purchase experience with unstable thinkpad x61s and bad customer service. i just brought this brand new X61s, and i was very disappointed. first i had to wait 5 weeks before lenovo can ship it since it was out of stock. once it arrived, it kept crashing on me, i literally had to reboot couple of times a day. i tried calling lenovo for support, it took forever to get thru to someone live, and they were not much help. this is very disappointing since i paid about USD1800 for it and it would even freeze on me every 2 minutes whenever i use msn messenger. they have also shorten the warrantee from 3 years to 1 year, so now i am stuck with it. i will never buy from lenovo/ibm ever again! you just lost a loyal customer !
Posted by jason12125 (1 comment )
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