Lenovo to become a more fleet-footed technology company

Technology giant hopes to expand beyond PCs by integrating IBM's low-end server business

PUBLISHED : Thursday, 30 January, 2014, 5:01am
UPDATED : Tuesday, 04 February, 2014, 5:28pm

The mainland's technology giant Lenovo is riding a big wave of positive momentum into its new restructuring plan that will see the company further expand beyond its core personal computer business.

Lenovo, the world's largest supplier of personal computers, announced late on Tuesday a sweeping reorganisation that would enable the integration of International Business Machines' low-end server business, which the company agreed to buy for US$2.3 billion in cash and shares.

Chairman and chief executive Yang Yuanqing said in a statement that the company was in "one of the most important and exciting phases" in its history after attaining strong market position in personal computers, smartphones and media tablets, as well as making its biggest-ever acquisition with the IBM deal.

"Given that momentum, now is the perfect time to prepare for the next phase in our growth. To do this, it is necessary to build new businesses and new pillars for our company," Yang said.

Investors yesterday cheered Lenovo's restructuring initiative. The stock rose 4.58 per cent to finish at HK$10.96, its highest close since reaching HK$11.18 on April 7, 2000.

Alberto Moel, a senior analyst at Bernstein Research, said the IBM deal, pending regulatory approval, "could be highly accretive to shareholders, given minimum share dilution".

Lenovo's effort to reorganise from a position of strength is a far cry from its situation in 2009 when an economic slump prompted the company to lay off about 2,950 workers worldwide, cut executive pay by 50 per cent, revamp its Asia-Pacific operations and replace the chief executive hired from rival Dell.

Following that dark period, Lenovo emerged to become the market leader in personal computers with 48,000 employees worldwide. Bernstein forecast the company would record revenue of US$38.66 billion in its financial year to March, up from US$33.87 billion a year ago.

Lenovo, which has operations in more than 160 countries, plans to set up four business groups from April 1: personal computer, mobile, enterprise and so-called ecosystem and cloud services.

The current organisation has a Lenovo Business Group in charge of consumer and mobile devices and a Think Business Group that handles products for the enterprise market.

"The new structure will help us to become even faster, more focused and more efficient in providing innovative products and services to an incredibly diverse global market," Yang said.

Gianfranco Lanci, the former chief executive at Taiwanese competitor Acer, will lead the personal computer group. He has headed Lenovo's Europe, Middle East and Africa operations since January 2012. Liu Jun, who now leads the company's consumer and mobile operations, will handle the new mobile business group.

Gerry Smith, who runs the Americas geographic market, will lead the enterprise group, which comprises servers and storage systems. George He, previously the chief technology officer, will head the ecosystem and cloud services group.