Lenovo's deal with IBM should inspire local companies The much-analysed merger between IBM and Lenovo could well be a signal to thousands of small companies in Hong Kong to start thinking big. 'It is high time Hong Kong companies were thinking about growth again,' said Timothy Cheung, general manager, IBM China/Hong Kong. 'For Hong Kong to continue to play a leading role in the region, the city and its companies must adjust to the macroeconomic environment and rethink their position in the marketplace.' Mr Cheung said transformation was on IBM's agenda when it sold its personal computer business to the Lenovo Group for US$1.75 billion. In return, IBM will acquire an 18.9 per cent stake in the mainland firm. The deal is expected to be completed in the second quarter. According to research firm Gartner, IBM will have lower revenue but improved profitability while retaining direct customer relationships. Lenovo will get a global sales and marketing operation, world-class research and a strong notebook business to complement its desktop PCs. Mr Cheung said the transformation Lenovo would achieve could serve as a model for the nearly 300,000 small businesses in Hong Kong, inspiring them to boost their potential by making the whole of China their market. These enterprises make up more than 90 per cent of all businesses in the territory. 'Many Hong Kong owners of small- and medium-sized enterprises [SMEs] are shrewd businessmen, but limiting their marketing horizon to Hong Kong also limits the growth of their companies,' he said. 'In the mainland, privately owned enterprises have grown from being virtually nothing 20 years ago to being 40 per cent of all Chinese enterprises. They are recognised as a major economic driving force.' To help boost the potential and opportunities of Hong Kong enterprises, IBM will focus this year on delivering a greater range of consulting and outsourcing services, computer hardware and software systems and mainland-Hong Kong operation support. The timing seems right for the strategy. Hong Kong has received a healthy forecast from research firm International Data Corp, which says technology spending in the city is expected to increase 7 per cent this year to US$3.26 billion, an improvement on last year's US$3.12 billion. Mr Cheung expects phase III of the Closer Economic Partnership Arrangement to get more SMEs involved in the mainland economy. Although bilateral trade talks have not yet begun, Hong Kong is likely to include 'national treatment' for local software and IT suppliers as part of proposed new trade concessions under Cepa III. 'Hong Kong companies accumulated a wealth of experience from working in China in the 1980s and 1990s,' Mr Cheung said. 'This experience has given them an understanding of the China market that is the envy of many western corporations.'