WorldCity Business Magazine

(2) Company Profile: Lenovo - China Connection

by Dan Weil

It may not look Asian, but Boca Ratons Lenovo is the biggest Chinese venture so far in South Florida.

Personal computer maker Lenovo is the largest and most visible Chinese-owned company with a presence in South Florida. But a visit to the companys Latin American headquarters in Boca Raton provides no hint of any China connection.

For starters, there are no Chinese workers there. Nor, for that matter, are there any Chinese employees at the various Lenovo offices in Latin America. Indeed, Lenovo takes pride that the companys staff is a polyglot mix of people from around the globe.

Its an international company taking the best from east and west, said Brazilian Tomaz Oliveira, Lenovos vice president for Latin America.

If that sounds like the motto of an established global company, thats because Lenovos Latin American division used to be part of IBM. In fact, IBM invented the PC in a building dubbed T-Rex across the street from Lenovos Boca office.

Lenovo acquired IBMs PC business in 2005 and now the Chinese company has three main corporate centers, in Beijing, Singapore and Raleigh, North Carolina, headquarters of the Lenovo PC division.

From his Boca office, Oliveira oversees the companys Latin American operations, with 32 workers in Florida and about 900 in points south. Oliveira, 41, had worked in IBMs Latin American operations before the takeover.

Under IBM, the focus of PC sales in Latin America centered on large companies. Now Lenovo is trying to expand its customer base to include more small and medium-size businesses and individual consumers.

We want to maintain our focus on large companies and grow our business in that area. But sales in the small and mediumsize business and consumer areas are growing at two to three times the rate in the large enterprise sector, Oliveira said. So thats a key focus.

The products Lenovo is selling in Latin America are the former IBM ThinkPads (notebooks) and ThinkCentres (desktops), primarily to large customers. To small and medium-size firms as well as individuals, Lenovo primarily offers its 3000 series of desktops and laptops.

In Brazil, the prices for Lenovo notebooks start at 1,999 reals (about $1,000) and, for desktops, at 878 reals ($440). Two outstanding features of the Lenovo line are that they are water resistant and, thanks to a built-in airbag, shock proof. In a recent demonstration for WORLDCITY, Oliveira tested the water resistant feature, pouring about four ounces of water on to the laptop of John Suarez,Lenovos regional marketing manager for Latin America. Suarez ended up with a lapful of water, but his notebook looked to be no worse for the wear.

While Lenovo sells cell phones, work stations and servers in Asia, it doesnt currently offer those products in Latin America. Oliveira declined to say whether the company has plans to do so in the future.

About 95 percent of the notebooks and monitors Lenovo sells in Latin America come from Asia, except in Brazil, where the government requires that nearly all products be made locally. But the company is looking to step up its production in Mexico.

In July, it announced a new manufacturing facility in Monterrey, Mexico. The $20 million project will add 750 workers to Lenovos payroll. The factory represents the firms largest manufacturing investment outside China and will produce desktops and notebooks for both Latin America and the U.S. market. Lenovo expects the new plant to be operational by the middle of next year.

The facility will be helpful in Lenovos effort to expand its presence in the consumer market, said Rafael Gomez, research manager of consumer and commercial devices for IDC Latin America. Lenovo ranks fourth in sales of desktops in Latin America, but only sixth in notebook sales, he said.

He declined to specify exactly which companies are ahead of Lenovo and in what order. But in desktops, the top five include Acer, Dell, Hewlett Packard and Brazils Positivo. In notebooks, the top six include those four plus Toshiba. In terms of worldwide PC sales, Lenovo is No. 3 after Hewlett Packard and Dell.

In Latin America, Lenovo is performing well above the market, Gomez said. In the second quarter of this year, it experienced 38 percent sales growth for PCs in the region, compared to 26 percent for the market as a whole. In desktops, Lenovos growth rate was 30 percent, double the 15 percent for the market as a whole. And for notebooks, Lenovo saw sales jump 71 percent, but the whole market did even better at 91 percent.

Lenovo is very focused on corporate business, but for the past two years, notebooks based in the consumer segment have driven the market, Gomez said. Lenovo is starting to create relationships with retailers to get into the consumer segment.

Lenovo has offices in Mexico, Brazil, Colombia, Venezuela, Chile, Peru and Argentina and manufacturing operations in Mexico and Brazil. Miami is used as an entrepot for some products headed to Central America and the Caribbean and Spanish South America.

Among Latin American countries, Lenovos sales are growing fastest in Brazil, Venezuela and Chile. Oliveira said Lenovo chose Boca for its Latin American operations rather than Miami, because Boca is where those operations were based under IBM. There already was PC competence in this area from IBM, Oliveira said. Moreover, without customers or manufacturing operations in South Florida, it doesnt make much difference where the office is located, he pointed out.

Last December, Lenovo finally weaned off the IBM sales force and started using its own made up largely of former IBM employees. The Chinese company continues to have close ties to Big Blue. Our sales forces cooperate. IBM passes leads on to us for smaller customers, and we pass leads to them on big corporations, Oliveira said.

IBM has Lenovo as its preferred PC vendor when IBM needs to outsource, and Lenovo uses IBM to service and support is products. In addition, IBMs leasing division continues to help finance purchases for Lenovos business customers and partners.

Lenovos takeover of IBMs PC business was positive for customers in Latin America. We were able to retain more than 95 percent of our customers from day one, he said. Business partners and customers saw an opportunity: how can they get the benefits of IBM with more efficiency created by the merger with China.

Indeed one of the main benefits of the takeover was Lenovos ability to cut IBMs bureaucracy, Oliveira said. For example, Oliveira now reports to Rory Read, an American based in Raleigh, who reports directly to CEO Bill Amelio, also an American.

The Chinese way has taught us to do things better and faster, Oliveira said. Procurement and manufacturing are two areas where we saw benefits from the beginning.

Oliveira, who spent two years training as a fighter pilot in Brazil, gets passionate when talking about Lenovos top Chinese officials. Its amazing how open and willing to understand international management the Chinese are, he said. The passion they demonstrate, and how warm they are and willing to contribute is amazing.

And what does it mean to Oliveira to be working in the PC arena across the street from the hallowed ground where Americas finest engineers at IBM built the very first PC in 1981: Its a good feeling, but nothing that really matters.