Stephen Ward, general manager of IBM's Personal Systems Group, has been anointed the future CEO of China's Lenovo, which on Tuesday announced a plan to acquire Big Blue's PC business. The new role will admit Ward into a fairly elite club -- that of the PC industry CEO -- where he will join the likes of Hewlett-Packard CEO Carly Fiorina and Dell chief Kevin Rollins.
But being a chief executive in the PC business isn't quite what it used to be. Growth rates are slower and competition is tougher in the industry-giant-dominated PC world of 2004. Thus Ward will ultimately take charge of steering the industry's newest giant through some rocky shoals.
At the outset, Ward will be faced with three major tasks. He'll have to keep quite a few people happy, including his work force, which is made up of just more than 19,000 people, and his numerous IBM customers. At the same time, he'll be working to knit together the new Lenovo's global operations in a way that lets the company leverage both the IBM name and the lesser-known Lenovo PC brands and designs, as well as their manufacturing, marketing and other functions.
The good news, Ward says, is that he'll have plenty of help. IBM has his back when it comes to sales and support. Meanwhile, Lenovo's focus on Asia means there's little overlap to sort out between Lenovo and IBM when it comes to products and personnel in the United States, Europe and other major markets. So Ward maintains that Lenovo will keep all of its employees and its manufacturing capacity in order to take aim at Dell and HP.
Still, keeping customers happy will be a tough task. Analysts are already predicting that major customers will defect. Forrester Research, for one, issued a report Thursday that said the IBM-Lenovo venture could put as many as 14 million PCs up for grabs in the United States. Ward says he is prepared for that too, and with the help of IBM's sales force, the new Lenovo will endeavour to assuage customer concerns.
Ward took some time out Thursday morning to discuss the early aims of the "new Lenovo" and its role in the PC market in the United States, China and parts in-between.
Q. Can you describe what Lenovo is and what its aims are for the post IBM PC group future?
A. Financially, what we've done is sold our PC business to Lenovo.
Lenovo is in PCs and in other businesses like mobile phones. The entire Lenovo company and the PC company will all be part of one new company we call the "new Lenovo." Its name will just be Lenovo. That company is headquartered in New York -- it's not a headquarters in Raleigh, it's not a headquarters in Beijing -- it's headquartered in Armonk. The senior management team will be here, including myself, including Yuanqing Yang, who will be our non-executive chairman. We'll be here. We'll work, of course, with our customers, with both of our principal operations in Raleigh and in Beijing and with IBM.
We will reincorporate the company. It'll be incorporated, most likely in the Netherlands or possibly in New York. I want you to think of this as an international company -- a publicly-held company -- as it is today.
Exactly. And very, very global. The thing that's very interesting about this is (that) our market share, combined, in China is bigger than anybody's market share in the United States. Everyone keeps saying, "Oh, the United States; you've got people that are so dominant you can't possibly beat them." But that's in a market that's not growing and is very saturated.
We're in a market (in China) that's unsaturated and growing like crazy. We have this huge share, so it's kind of interesting to look at that.
How will the integration affect your employees and customers?
Let me take customers first. Lenovo is exceptionally strong in Asia and China particularly, in retail (where they have 4,000 stores), and in small business. They also have a good large business, but they're really strong in consumer and in small business. We're not strong there at all. They don't sell outside of Asia, so there's no conflict outside of Asia.
If you just look at employees ... sales, marketing, management, development, research, back-office, finance -- everything other than manufacturing employees -- we have 200 employees in China and Lenovo has basically no employees outside of China.
What's the integration plan for the United States? It's real simple. All the Lenovo employees in the United States are IBM employees. What's the integration plan in Japan? It's IBM (employees becoming Lenovo employees). There's nothing really to integrate is the point.
How will you handle the two companies' manufacturing operations?
We have manufacturing, which is our IIPC (International Information Products Company), and Lenovo has their manufacturing. Both of those plants -- Lenovo has got a capacity of 5 million; we've got a capacity of more than 10 million -- we're using the capacity and they are as well.
The reason our competitors are going to throw out a lot of FUD (fear, uncertainty and doubt) about this is none of them manufacture anything.
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