Lenovo targets small business
Mary Ma, chief finance officer (CFO) of world number three PC producer Lenovo, laughs somewhat ruefully when asked about her top priorities. "My first priority is to try to find more time to sleep," Ms Ma says. "I only got four hours last night ... I got to bed at two and was up at 6:30 am for a conference call at seven."
Ms Ma has good reason to be burning the candle at both ends. As one of the most influential figures in Lenovo management, she has a central role in making a success of its $1.75bn acquisition in May of IBM's iconic but anaemic PC unit.
The deal quadrupled Lenovo's sales and made it the standard-bearer for corporate China's global ambitions. But knitting together a company with a Chinese base and New York HQ 12 time zones apart means leaders of the new Lenovo routinely labour long beyond normal knocking-off time.
"We have to keep doing conference calls and exchanging views every day, for at least two hours. This is why I've got no time to sleep," Ms Ma says.
So far, however, the effort appears to be paying off. Last August, Lenovo pleased investors with quarterlies that included two months operating the former IBM unit. The company now expects integration of the two operations to be generating savings of $200m a year by next March.
The savings are coming not from layoffs or closures but from efficiency gains in the supply chain, operations and procurement, where Lenovo's new scale helps it bargain with suppliers. The company also expects to win savings from Intel and Microsoft, both of which compete with IBM and were not inclined to offer deals to Big Blue's PC unit. "We are looking for a better partnership with Intel and Microsoft," says Ms Ma. "We will be a good partner and they will be good suppliers."
But savings alone will hardly be enough to ensure success in a market beset by competition and declining margins. Lenovo also has to make wider use of the global PC unit's "Think" laptops and PCs than IBM did.
First on the agenda are small and medium-sized businesses, long neglected by IBM, which focused mainly on large enterprises.
Lenovo last month issued a new series of Thinkpad laptops to woo small businesses by combining the brand's traditional virtues of reliability and security with features such as a wide screen. "Being part of Lenovo has given us more flexibility in developing our products to address customers beyond our IBM base," says Peter Hortensius, senior vice-president for worldwide product development. "We think we can stretch the brand clearly into areas it has never been before."
An expanded distribution network will be necessary to extend Lenovo's reach in developed markets. Ms Ma is talking to distributors about selling PC "education solutions" in the UK.
Greater marketing reach should pave the way for the future launch of consumer PCs and laptops not sold under the Think brand. But Lenovo expects quicker gains from applying to developing countries the methods China's biggest PC company has pioneered at home.
Ms Ma says a recent drive into China's 600-plus smaller cities has widened Lenovo's reach into the low-end consumer market without narrowing margins. With cheaper chips supplied by AMD rather than Intel, such sales actually have aboveaverage margins, she says.
"In emerging markets [the approach] will be more or less similar to China," Ms Ma says. "The strategy here is: high margin does not mean high price, high margin does not mean high end. We will target very, very aggressively the SMB market and emerging markets."
Lenovo's strategy carries risks. Tinkering with the Think brand could weaken its premium status. Prospering in downmarket PCs will demand tight inventory management and close monitoring of servicing costs.
At least Lenovo, which has unveiled a corporate reorganisation intended to unify its Chinese operations and the global PC unit, shows no signs of the deep management frictions and conflicting interests that have troubled other Chinese companies' overseas acquisitions and joint ventures.
Ms Ma admits one senior IBM manager was shocked then angry when he heard of the PC unit's sale to a Chinese venture - but she claims his dismay turned to excitement in days.
Few managers from the PC unit have defected from Lenovo since the deal and some IBMers have applied to join the Chinese company, apparently untroubled by the long hours. "Now they have people coming to us," she says. "They think it's a new company with a very promising future."