Lenovo is raking up American companies

ThinkPad 760ED, which I bought in 1996. The machine was of course manufactured by the real IBM and it is a piece of manufacturing wonder. For example, it’s velvety to touch, the various apertures open in a magical fashion, the machine is sturdy and very compact, and it is quite heavy, but in a very […]

ThinkPad 760ED, which I bought in 1996. The machine was of course manufactured by the real IBM and it is a piece of manufacturing wonder. For example, it’s velvety to touch, the various apertures open in a magical fashion, the machine is sturdy and very compact, and it is quite heavy, but in a very nice way. Overall, the machine is just beautiful and exquisitely put together in terms of the hardware. In short, the machine is reminiscent of IBM’s manufacturing genius of yesteryears, and I will keep my ThinkPad for my grandchildren. Of course, I was an IBMer all through the 1990s and early 2000s, writing my system codes to support AIX, IBM’s version of AT &T’s UNIX operating system (OS). I almost suffered from some withdrawal syndromes when MS-DOS, and eventually, Microsoft Windows came to supplant the various UNIX clones!  (Thank God, I adapted very quickly and moved on to the new OS’s.)
The software in the ThinkPad of the time was even more impressive: The operating system (a combo of Windows 95 and Disc Operating System (DOS)) somehow survived the much anticipated Y2K problem in which the OS and applications in computers running Windows would crash because Microsoft and application developers had not anticipated that the year would one day not start with the digits “19,” and so had hard-coded the first two digits of any year to “19.” Well, Year 2000 came and my ThinkPad was just fine. However, a few Packard Bell desktop computers that I owned at the time didn’t survive Y2K.
I just turned on my ThinkPad laptop a few minutes ago to get a glimpse of the software products of the time, and it worked! The web browsers were Netscape and Internet Explorer 4.0, with the former being the Cadillac of the time, and the latter, the Indian auto rickshaw (tricycle). The email services at the time were AOL, Netcom, and CompuServe. The hard drive has a memory of 2.0 GB, and there is an external 31/2-in Floppy drive. The chip was Pentium (r), RAM was 16 MB, and the file system was 32-bit.
Now that you’ve “heard” my ThinkPad story, I can tell you how Lenovo comes into the picture. Lenovo has been around for approximately 30 years, after being spun off by Legend Group, a Chinese government agency. So, Lenovo is at least partly owned by the Chinese government! However, I don’t think most people outside of China knew of Lenovo until its acquisition of IBM’s ThinkPad Laptop business in 2005. This acquisition is seen by some as the reason for Lenovo’s eventual success in the PC business that helped it overtake Hewlett-Packard (HP) and Dell to become the world’s Number One PC manufacturer in 2012.
Lenovo also manufactures smartphones. According to IDC, the business stats folks, Lenovo ranked fifth in smartphone global market share in 2013, behind Samsung (31.3%), Apple (15.3%), Huawei (4.9%), and LG (4.8%). However, over ninety percent of Lenovo’s smartphone customers are in China, so there is no global patronage as of now. Lenovo would like to have that situation changed. Also, although Lenovo is the leading PC manufacturer in the world, the company does see a declining PC business, as smartphones and servers continue to gain prominence. Lenovo’s “PC Plus” strategy is the vehicle that the company wants to use to plan for the future. The device components of the strategy include laptops, smartphones, tablets, and servers.
Toward implementing the PC Plus strategy, Lenovo has come back to the U.S., hoping that lightening would strike three times in the same country. So, over just the past 7 days, Lenovo has raked-up two deals in the U.S. worth $5.2 billion. The company announced a $2.3 billion deal to buy IBM’s low-end server business and another $2.9 billion to buy Motorola Mobility from Google. The server business will allow Lenovo to compete with Dell and HP on servers. The servers Lenovo is buying from IBM are the basic, commodity, low-end types, running the x86 chip, as opposed to the more powerful high-end types. The Motorola deal may propel Lenovo to world’s Number 3 smartphone company, allowing Lenovo to hopefully overtake Huawei and LG.
Will the acquisitions deliver? I do not think that anything is carved in stones as at yet. Moreover, the U.S. National Security Clearance has to agree to the deals. Although the IBM ThinkPad acquisition of 2005 was approved by the U.S., the current Sino-U.S. cyber espionage climate does not appear to be as favorable. With the often reported widespread Chinese hackers attacking U.S. corporate and military networks, as well as the revelation by Edward Snowden of the espionage possibilities when governments work with telcos, the current Lenovo acquisition plans may not sit well with the U.S., especially since Lenovo is partly-owned by the Chinese government. The other issue pertains to Lenovo’s ability to integrate the acquisitions into its existing business framework.
Even if Lenovo succeeds in integrating Motorola, there are still issues. Yes, Motorola is currently the third-largest Android-based smartphone manufacturer in the U.S., the company invented cell phone, and it works with more than 50 mobile phone carriers worldwide. But its share of the smartphone business is only paltry, and neither Samsung nor Apple will feel a dent. Huawei and LG might.
The bottom line in this article is that Lenovo is a company that is in a hurry to lead the world in high tech, and is going about it by raking up and fixing American high tech companies in trouble.