IBM-Lenovo: Merged To Succeed

The IBM-Lenovo merger created waves in the IT industry. It was received with much speculation from various industry big-wigs, and market segments. With the deal being closed, the combined entity headquartered in Purchase, New York is all set to focus on its strengths in quality, service and innovation in technology. As the Chinese PC maker moves ahead, a key for Lenovo would be to maintain sharp focus on the product quality and channel service and support that characterized IBM's PC business. 

It is of immense importance for IBM to understand that its existing customers will be loyal to IBM and Lenovo as long as they don't drop the ball and they are committed to the channel, in terms of maintaining their support and programs.

What the deal really means?

IBM's deal to sell its PC business to Chinese computer maker, Lenovo Group for $1.75 billion would mean a lot of changes for both the companies. Officials on both sides expect these results to be positive. However, users of IBM desktop PCs and notebooks opine that this deal will only succeed if nothing changes for them. 

The recent completion of the deal between IBM and Lenovo presents a number of new opportunities for the new
Lenovo. But the combined entity will have to work hard towards proving that the change represents real benefits for its existing and potential customers! 

IBM-Lenovo as a combined entity will start shipping both new Lenovo and ThinkPad products within weeks -- in part to show that the merger has not distracted it from further innovation. Lenovo is studying how to market its various brands, especially consumer products, in new markets outside of China.

What's in for India

“Business continuity and product leadership in the Indian region is our mantra for this region. In the coming months, we would create a high performance culture to deliver Lenovo's commitment to customers,” asserted, Neeraj Sharma, MD, South Asia,
Lenovo.

If we look at this deal from a global perspective, the idea is to be competent in the market by achieving operational efficiencies. “With the help of this merger, we would be able to achieve operational efficiencies. Product innovation is key for us. When it comes to our existing brands like 'Think series', we would further innovate on the technological front,” he explained.

On the manufacturing side, the company would fuel its Indian requirements from its existing manufacturing unit based in
Pondicherry. As far as channel is concerned, nothing much will change, as the company will continue to interact with them the usual way. Almost all IBM products will continue to evolve according to their original roadmaps.

“All our brands have a planned roadmap and that will be followed by the company. Thus, this merger would not create any changes for ThinkPad or ThinkCenter series. Our core strategy would be to introduce the company to our customers and channel in the coming next two months,” explained, Vivek
Malhotra, Director, Sales & Channels, South Asia, Lenovo.

“We are a partner-focused company and would continue to work very closely with them in the future. Whether it is a systems integrator or a value added reseller, we would make sure that business continuity remains,” Vivek commented. 

The agreement also insists on support of IBM ThinkPad and IBM ThinkCentre brand product lines. Both companies have charted out the product development and roll-out map for the next 18 months. IBM India has said that it would continue to support channel partners. 

Global perspective

With IBM taking an 18.9% stake in Lenovo, it has become its second largest shareholder. The deal is likely to quadruple Lenovo's personal computing business. And it will be a partnership — meaning that IBM will be the preferred services and customer financing provider to
Lenovo, while the Chinese company will be the preferred supplier of PCs to IBM. 

With IBM's global presence, Lenovo Group has already moved its PC business worldwide headquarters to New York and has added some 10,000 IBM employees--about 40 per cent of whom are already in China. 

Manufacturing of IBM-branded desktop and laptop products will continue. However, over the next five years, the brands on those products will be phased out in an orderly fashion. Existing customers would need reassurance that R&D would continue with Lenovo before they invest in them in the near future. Even loyal IBM customers would need assurance that existing systems would continue to be supported as usual.

IBM's strength lay in the mid-market, enterprise and notebook markets and Lenovo's in the consumer and SMB spheres. “It is a merger of synergies between two companies, rather than an overlap. We have good relationships in the retail sector and can leverage those products with the resellers we already have,” said
Vivek.

On the channel front, IBM has had strong incentive programs. A lot of resellers are looking forward to continue under
Lenovo. It gives IBM another reason to be more than careful in completing the transition to Lenovo in a channel-friendly way. 

The driving logic behind this deal is that China can deliver goods and it would help towards keeping down the costs of PCs. Though, it is unclear whether this reduction in cost factor will be passed onto the end customer or not.

The combined $13 billion-in-revenue-a-year company brings together Lenovo, which sells nearly one-third of branded PCs in China, with IBM, whose ThinkPad brand is popular with business users globally, forming the world's third largest PC maker. 

Lenovo in the big league

With help of this multi billion dollar deal — the erstwhile Chinese company has already catapulted itself into a cut-throat competitive world with Dell Inc and Hewlett-Packard as rivals. More importantly, Lenovo must face off against a host of established Japanese names and Taiwanese rivals that are beginning to get dangerously global and expanding into North American, European and other markets. 

Lenovo has opted for an expansion strategy, in which it is, in principle, partnering with IBM to move overseas. This Sino-American approach differs from the approaches taken by other companies, especially in regions like Taiwan. 

Other major PC manufacturers from Taiwan, such as Asustek and BenQ have been making selective moves into the US and other markets. Greater China, including Taiwan, supplies almost everything to everyone in the PC industry. However, on the branded side, it has not tasted global success so far. With IBM's global name being tagged with
Lenovo, China's branded product story may change on the global front.

ZIA ASKARI 

NEW DELHI