Lenovo is set to use IBM deal to target the West

The sale of IBM's personal computing division to Lenovo was one of the biggest stories at the end of last year, because of the size of the deal, valued at $1.75 billion (€1.39 billion); the seller, IBM; and most of all, the buyer, an almost totally unknown Chinese PC maker.

Few people outside of China had ever heard of Lenovo before December, though the company is China's biggest PC manufacturer and a corporate powerhouse that employs almost 10,000 people there.

As the final contracts on the acquisition are signed this week, the new entity - in which IBM retains an 18.9 per cent stake and whose board is now almost entirely ex-IBM people - faces both massive challenges and lucrative opportunities.

Top of the list of challenges is to create trust in, and familiarity with, the brand for the millions of existing customers as well as the broader global PC market to which the name Lenovo means little.

"We're all very well aware of that situation," says Milko Van Duijl, general manager Lenovo, Europe, Middle East and Africa, who works out of Lenovo's small European headquarters in Paris. Much of the corporate brainstorming since the acquisition was announced has focused on tackling that issue, he says.

A priority seems to be to make the company appear less Chinese and more an international player in the PC market. Thus, the firm's global HQ has been shifted immediately from Beijing to New York, and the old board of Lenovo has been almost completely replaced, bar two positions, with people from the former Personal Computing Division (PCD) within IBM, the division acquired by Lenovo. Three seats will also go to a strategic investor group.

"The people running the company are now those well-known outside China," Mr Van Duijl says, including the chief executive, Stephen M. Ward, Jr, previously an IBM senior vice president and general manager of IBM's Personal Systems Group. In addition, the same salesforce from IBM has transferred over and will continue to cover the accounts, and through a complex joint venture aspect of the deal, IBM's Global Services (IGS) division will handle warranty and support services. There will be other IBM interaction with Lenovo, while Lenovo will be IBM's supplier to the market of personal computers.

Lenovo has also acquired the rights to use the IBM brand name directly on its products - though not in advertisements - for up to five years as a transition is made over to the Lenovo name.

In particular, says Mr Van Duijl, the Thinkpad name (used for IBM's laptop line), ThinkCentre for desktops and the general term "Think" will be used extensively for products (Lenovo acquired full rights to its use). He notes that consumer testing showed that the "Think" name was strongly associated as a brand with IBM and Lenovo will capitalise on the association: "Because ThinkPad has lots of brand recognition, we'll continue to use Think as a brand."

He says IBM surveys showed most existing customers were comfortable with the Lenovo buyout and that only about four per cent of existing customers said they were neutral or would reconsider purchasing decisions in future.

Lenovo has just begun to run its first television advertisements and has produced a booklet for customers that portrays Lenovo as an innovative company which offers a range of products, not as "just another PC maker".

Mr Van Duijl says this will help to start building the brand recognition for Lenovo which should be heightened during the next summer Olympics, to be held in China, with Lenovo as a major sponsor. Nonetheless, analysts believe the Chinese company, no matter how well-known in Asia, will have its hands full as the first big corporation to try to win over western markets and establish a global brand.

Lenovo's strategy in Europe will include offering additional products - an ultra-portable finger scanner will be launched soon - and to target the low-end desktop market that appeals to small-to-medium business customers, but which IBM never directly catered for, says Fiona O'Brien, Ireland general manager, Lenovo. The company will also go after emerging markets such as central and eastern European countries and Russia.

Because of the deal, Lenovo will acquire about 40 call centre support, web design and sales team staff based in Ireland. Manufacturing for Lenovo is based in China and research is also conducted in China, though the company has also picked up IBM operations in locations such as North Carolina, Japan and Scotland.

While short term the company has no plans to immediately shift or add to existing European operations, Mr Van Duijl says "we are looking at opportunities". These could include an Irish dimension.

Ms O'Brien says of the Irish operation: "It's early days, but we want to grow. We'll be looking to strengthen those [ existing] positions."

Asked what Lenovo's biggest challenge is, Mr Van Duijl says "time. There aren't enough hours in the day to get done what we want to do. We're now number three in the PC market - but we don't intend to stay number three."