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New Lenovo takes shape

The company, which is buying IBM's PC business, aims to become a giant that can compete globally with Dell and HP.

Desktops
The nouveau Lenovo wants to shake up the PC market's status quo.

Fran O'Sullivan, IBM
Fran O'Sullivan,
will be COO of
Lenovo International

Lenovo Group, China's top PC maker, is moving ahead with its plans to acquire and incorporate IBM's PC business, despite the deal being the subject of an ongoing review by the Committee on Foreign Investment in the United States, a federal interagency panel chaired by the secretary of the Treasury.

The new Lenovo has already formed a team of top executives and established an integration plan; it has also begun evaluating ways to market Lenovo-designed computers outside of China--all with the intent of being ready to compete as soon as the deal, scheduled to close in the second quarter, is done.

"We are chomping at the bit to have the deal close," said Fran O'Sullivan, a 22-year IBM PC executive who will become chief operating officer for Lenovo International, which will handle the company's business outside of China. "It's more exciting now than it was then," she said, referring to her time at IBM during the go-go days of the early PC market.

News.context

What's new:
The new Lenovo aims to become a PC giant that can compete globally with Dell and Hewlett-Packard. A team of top executives is lining up to take over, and an integration plan is in place, along with a catchy motto: "Status quo is a no go in the new Lenovo."

Bottom line:
Even assuming Lenovo does everything right, it still has a mountain to climb. Among the challenges: Its brand name is untested outside of China. How will it measure up?

More stories on IBM and Lenovo

The new Lenovo, as its executives have referred to it, aims to combine its own business in China with IBM's in the rest of the world, creating a PC giant that can compete globally with Dell and Hewlett-Packard. Lenovo is set to become the world's third-largest PC maker, after Dell and HP, when the multibillion-dollar deal, announced last December, is completed.

The company also aims to bring Lenovo PCs, now available only in China, to the rest of the world. These machines have some attractive features; several of Lenovo's machines, such as the Tian Jino A desktop, which includes a built-in voice over Internet Protocol telephone, look more like they might have been built by Apple Computer, rather than a company like IBM.

But even assuming Lenovo does everything right, it still has a mountain to climb. Dell, the king of the hill, and HP aren't likely to cede market share willingly. Moreover, they can use the uncertainty created by the Lenovo deal as ammunition in an attempt to woo away IBM's corporate customers, analysts have said. Despite Lenovo's fresh-looking designs and the potential for the new company to offer lower prices thanks to its greater scale, its brand name is untested outside of China.

Lenovo is "basically as good as anybody else, but people don't know that," said Roger Kay, an analyst at IDC. "The challenge is to acquaint people to Lenovo. The other issue on the reverse side is retaining IBM's enterprise customers, who might be concerned that the change in management means something's disintegrating and that IBM's best technology is coming from its other groups."

O'Sullivan admitted that between now and the close of the deal, the new Lenovo has a lot of work to do. But she said it will move swiftly, operating under the new slogan that "status quo is a no go in the new Lenovo."

Having settled its executive ranks, Lenovo's main initiatives now involve taking advantage of its larger scale--something that can bring better prices on the parts it needs to build its PCs--and establishing the Lenovo brand name. It has begun working on ways to sell Lenovo- designed products to the rest of the world, O'Sullivan said. Those efforts could yield the delivery of Lenovo-brand desktops and notebooks to customers in the United States, for example.

The new Lenovo is also likely to move more quickly and target different types of customers than IBM's PC group has in the recent past, including consumers and very small businesses.

Lenovo's Tian Jino A desktop
Photo: Lenovo
Lenovo's Tian Jino A desktop has a
built-in VoIP phone.

O'Sullivan, along with two other executives, will oversee the integration process, she said. In all, there are 17 functions, ranging from parts procurement to accounting, that must be integrated. Each has its own integration leader.

"Every single function that touches how you take an order, build a product and ship a product has a team assigned to the transition," O'Sullivan said. "Every single country has a transition team so that they can look at, 'How can I, on day one in my country, be ready to operate...as the new Lenovo."

As previously reported, the new Lenovo's headquarters will be in New York, but it will maintain operations in Raleigh, N.C., and in Beijing. Yang Yuanqing, who is now president and CEO of Lenovo, will become Lenovo's chairman, while Stephen Ward, currently general manager of IBM Personal Systems Group, will serve as its CEO. Mary Ma, Lenovo's CFO, will remain at her post.

O'Sullivan, in her role as COO of Lenovo International, will focus on selling products outside of China. Liu Jun, currently a senior vice president with Lenovo, will become the COO of Lenovo China, focusing on efforts in the country.

The new Lenovo will have a wide range of markets to set its sights on. While IBM PCs, such as the ThinkPad notebook line, are distributed widely around the world, Lenovo PCs are not. Lenovo products can thus be introduced in the United States, Europe and other markets, O'Sullivan said.

"(Lenovo is) basically as good as anybody else, but people don't know that."
--Roger Kay
analyst, IDC

This week, IBM showed the Tian Jino A desktop along with another, low-cost desktop PC to distributors at its PartnerWorld conference in Las Vegas in an effort to give them an idea of what to expect.

The new Lenovo will continue with IBM's hybrid sales channel, offering its PCs both through distributors and direct to customers, via the Web and telephone sales.

But it won't just stick to the business markets it will inherit from IBM.

"Frankly, we were on a strategy to being extremely focused on corporate accounts" before IBM's announced partnership with Lenovo, Ward told attendees at PartnerWorld, adding that businesses buy only about half of all PCs. "There's a big opportunity for us as the technologies become deepened and more and more available to get out into that (consumer) market."

CNET News.com's Martin LaMonica contributed to this report.

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