Lenovo to expand beyond China

China's PC giant and IBM are developing plans to export Lenovo's product lines around the world once the merger is complete.

LAS VEGAS--The merger of IBM's PC unit and Lenovo will allow the Chinese giant to accomplish a goal that has bedeviled it for years: sell its homegrown products overseas.

IBM's PC unit and Lenovo are developing plans to export Lenovo's product lines to other parts of the world after the merger is complete, Robert Galush, vice president of product marketing in IBM's PC division, told CNET News.com at the Consumer Electronics Show here. Future markets could include Europe, North America and the other parts of Asia, he said.

"I am certain we will leverage the Lenovo offerings beyond China," he said. "There is a tremendous amount of experience that allows (IBM) to release products in 160 different countries."

IBM and Lenovo, China's largest PC company, announced plans to form the joint venture last month.

The conglomerate will also likely keep the Lenovo brand name when it goes overseas with those products, though the products now sold under IBM brands will remain IBM products, he added.

Depending on the perspective, IBM and Lenovo don't have a lot in common. Lenovo, formerly Legend sells PCs, cell phones and other devices primarily to consumers and small businesses. By contrast, IBM's PC unit sells desktop and laptops primarily to large corporations.

As a result, the overlap between the skills and product lines of the two companies is not huge. If anything, the overlap is far lower than it was in the merger of Hewlett-Packard and Compaq, Galush said.

Ideally, IBM and Lenovo will complement each other, he said.

Lenovo has crafted a number of unique notebooks and even won design awards at various conferences. However, the company has had little luck expanding out of China. It sold some notebooks in Spain and had plans to begin to go international in 2002, but it retreated after market share losses in China.

At the same time, teaming up with Lenovo will give IBM greater access to Chinese clients.

"There are opportunities for growth everywhere," Galush said. "We've gone after different audiences."

Nonetheless, layoffs are likely. IBM's PC unit has lost millions of dollars in the last few years. Sales growth will reverse some of the losses, but costs will also be cut.

"There will be efficiencies between the two companies," he said. "No doubt, efficiencies are part of it."

Details regarding the international push still need to be worked out, he said. IBM executives are beginning to attend meetings in China to map out plans and people on both sides of the Pacific and are brushing up with Mandarin-English educational CDs.

In the meantime, IBM has been aggressively meeting with its customers to explain the deal and assure them that IBMers will remain active in the company following the consummation of the deal, he said. Lenovo's new CEO, after all, will be Steve Ward, a longtime IBM executive. Several other IBM faces will be there as well, Galush added.

More details will be made public after the deal concludes in the second quarter, Galush said.

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