LENOVO'S ACQUISITION of IBM's personal computer unit for US$1.75billion in late 2004 stands out as corporate China's first big foray into the global market; the purchase was a show of confidence that Chinese companies could hold their own with the best in the world. But as with similar deals, such as the acquisition of French giant Thomson by Guangzhou-based television manufacturer TCL, it is still too early to comment on the success of the venture. 'I hold to my original view that this is really a very complementary transaction,' said Mary Ma, Lenovo chief financial officer and one of the chief architects of the IBM acquisition. Lenovo, now the world's third largest PC maker, had 7.2 per cent of the world market in the fourth quarter of last year, compared with Dell's 17.2 per cent and Hewlett Packard's 15.7 per cent, according to research firm IDC. Lenovo's challenges extend beyond the fact that the company has been losing market share abroad to HP and Dell, as giant enterprise clients switched their allegiance away from old contracts with IBM. Nor has it helped that the company has been sullied by political mud-slinging in Washington. A 16,000-unit procurement deal with the US State Department has come under fire from American lawmakers who said the company did not have to compete in the marketplace because of its Chinese government connections. Critics even raised the spectre of Chinese spies gaining access to America's deepest secrets. 'The US market should understand Lenovo as a company better than they do right now,' said Ms Ma, named the world's ninth most powerful businesswoman last year by Fortune magazine. She would not be drawn into a discussion about the political vicissitudes in Washington, but she was happy to explain the company's complex ownership structure. Hong Kong-listed Lenovo began life in 1984 when the government's Chinese Academy of Sciences invested US$25,000 in what Ms Ma liked to describe as a venture capital deal. The original entity, Legend Group, now owns real estate companies and venture capital funds of its own, as well as 42 per cent of Lenovo. The rest is divided among public shareholders (34.7 per cent); IBM (13.2 per cent), and three private equity investment firms: Texas Pacific Group, General Atlantic and Newbridge Capital (combined 10.1 per cent). The Chinese PC market is one of the most competitive in the world, and even its rivals acknowledge that Lenovo is among the most transparent of Chinese companies. 'The market is increasingly open and there is fair competition for IT companies in China,' Ms Ma said. 'China's government and ministries are moving towards a more open environment and encouraging privatisation, not only among entrepreneurs but also among state-owned companies.' US lawmakers will have a tough time gaining political capital out of the State Department procurement deal, but the criticisms highlight the problems Lenovo faces as it ventures out into the international market. Another hurdle is the integration of two companies with different cultures, languages and legacies. 'If we want to change [the PC division inherited from IBM] into a very competitive PC player, it will take some time because they were not fully competitive when they were with IBM,' Ms Ma said. 'The cultural integration and team integration is real long-term work.' Because the IBM unit was three times Lenovo's size, critics likened the deal to a snake devouring an elephant. But when the first quarterly results came out after the transaction, the new company had seemingly performed a miracle by transforming a perennial loss-maker into part of a profitable manufacturing empire. 'At the very beginning the market was too pessimistic over this transaction,' Ms Ma said. 'Then we had the results announced, and they thought: Wow, they managed to turn it around so quickly. To be honest, I wouldn't be that optimistic at this stage.' Analysts say the company's strategy is to maintain its strong and growing share of the booming Chinese market, where it holds 37 per cent market share (up three or four percentage points from a year earlier, according to Ms Ma), while seeking to make its overseas operations profitable. The strategy is to concentrate on small and medium-sized companies and transfer some of the cost structure strengths it has developed in the Chinese market. Last week, the company announced a partnership with US retailer Best Buy to sell its own brand PCs in the US. Under the terms of the acquisition, Lenovo can use the IBM brand until 2010, by which time it hopes to have established its own name around the world. 'This is a long-term task, not an overnight thing,' Ms Ma said. 'There's lots to do.'