Lenovo begins full integration of IBM PC unit

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Lenovo on Friday announced a management reorganisation that marks the start of full integration between China’s largest personal computer company and IBM’s PC division, which it acquired earlier this year for $1.75bn.

The integration is a crucial test of Lenovo’s ability to transform itself into China’s first high-tech multinational. Lenovo executives said the reorganisation was being launched a month ahead of schedule after the company performed better than expected after the IBM acquisition was announced in December.

The combined business is the third largest PC maker after Dell and Hewlett-Packard. Under the new management structure, a combined supply chain and logistics operation will be run by Liu Jun, until now chief operating officer of Lenovo’s China business.

Worldwide research and development will be run by George He, also from the Chinese side of the business. Fran O’Sullivan, formerly chief operating officer of IBM’s PC division, assumes responsibility for product strategy for the combined business. The role will make her one of the most high profile western female executives on the Chinese business scene.

Ravi Marwaha, a veteran IBM sales executive, becomes worldwide head of sales.

Analysts say that combining the management teams from two very different companies will be a huge challenge for Lenovo, which had little international experience before the acquisition.

Other Chinese electronics companies have sometimes struggled to work with international executives, with TCL recently being forced to restructure a troubled mobile phone joint venture with Alcatel.

When the IBM acquisition closed on May 1, Lenovo moved its corporate headquarters to Purchase, a city north of New York City. Yang Yuanqing, former chief executive of the Chinese company, took the role of chairman. Steve Ward, former head of IBM’s PC division, became chief executive of the enlarged company.

Until now, however, Lenovo’s core business in China has been run separately from the international operations acquired from IBM, including the ThinkPad notebook computer business.

Lenovo hopes that integration will allow it to cut costs by leveraging its scale as a buyer of microprocessors and other electronic components.

Lenovo hopes to grow in the face of fierce competition across the PC industry by expanding the Lenovo brand internationally, with a focus on emerging markets, and promoting more aggressively the ThinkPad brand in China.

Under the terms of the acquisition, Lenovo has the right to use the IBM logo on ThinkPad and other products for five years and remains IBM’s “preferred supplier” of PCs in corporate information technology deals.

The largest US technology company also took a 13.4 per cent stake.

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