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Saturday, December 25, 2004

New York Times > Chinese Buyer of PC Unit Is Moving to I.B.M.'s Hometown

By DAVID BARBOZA
BEIJING - Inside the shimmeringheadquarters of the Lenovo Group,China's largest computer maker,workers are carting birthday cakes overto three office cubicles.These days, every employee here getsa birthday gift, something amultinational company might beexpected to do in this age of feel-goodcorporate management.The problem is that people in China donot traditionally celebrate birthdays.But that is changing. And so is Lenovo.It is trying to become a global companywith its purchase of I.B.M's personalcomputer business for $1.75 billion,and handing out birthday cakes is justpart of the process of evolving into amultinational corporation.To further globalize the company,however, Lenovo will do somethingeven bolder: it will move itsheadquarters to Armonk, N.Y., whereI.B.M. is based, and essentially handover management of what will becomethe world's third-largest computermaker, after Dell and Hewlett-Packard,to a group of senior I.B.M. executives.American multinational companiesoutsource manufacturing to China. Whycan't a Chinese company outsourcemanagement to the United States?Executives at Lenovo - which getsabout 98 percent of its $3 billion inrevenue from China - are, in effect,acknowledging that they do not havethe necessary global experience to runthe new company."The most valuable asset we haveacquired through I.B.M.'s PC businessis its world-class management teamand their extensive internationalexperience," says Liu Chuanzhi,chairman of Lenovo and one of thecompany's founders.Indeed, few executives at Lenovo seemdisappointed by the move. In fact,many seem pleased to be buying into ablue-chip American corporation.After all, Lenovo - formerly known asLegend - may be the biggest computermaker in China, but the company is stillvirtually unknown outside of Asia.And top executives at Lenovo say theyare eager to learn how to run a globalcompany from their new colleagues atthe PC unit of I.B.M., which operates inmore than 150 countries and had $9billion in revenue in 2003.Preparations are already under way inBeijing. For the last few months, allvice presidents have been required tostudy English for at least one hour aday. The chairman says he has readbooks about Bill Gates and AndrewGrove. And the chief executive ofLenovo has agreed to give upday-to-day management of thecompany to assume the role ofchairman.His task will be to fly back and forthfrom Beijing to New York to consultwith Lenovo's newly named chiefexecutive, Stephen M. Ward Jr., thesenior vice president and generalmanager of I.B.M.'s Personal SystemsGroup.Many analysts were surprised byLenovo's decision to outsource itsmanagement to New York."I admire what Lenovo is doing," saidJoe Zhang, a UBS analyst who followsLenovo. "Many Lenovo executives havedecided to do this at the expense oftheir careers. They're putting personalego behind for the greater good of thecompany."People involved in the negotiations withI.B.M. said that Lenovo officials saw noother choice. They recognized thatLenovo could not simply take over amuch bigger I.B.M. PC unit and run itfrom Beijing.That is why a major theme of the talkswas how to keep business as usualafter the deal was completed, thosepeople say.While I.B.M. is full of M.B.A.'s, Lenovo -which is still partly government owned- has only two members of the seniormanagement team with an M.B.A. Andnone of the top executives have everworked for a multinational corporation.But analysts also say that Lenovo is nopushover. The company is consideredone of China's most successfulcorporations. For years, for example,Lenovo's brand has outsold Dell,Hewlett-Packard and I.B.M. computersin China.And even though it began as astate-owned enterprise, Lenovo hasalways been entrepreneurial, analystssay. It was one of the first companieshere to list its shares in Hong Kong. Itwas among the first to reward itsemployees with stock options, whichhave turned some of its top executivesinto millionaires.The company's identity was shaped, inpart, by its visionary chairman, Mr. Liu,who in 1984 helped found Lenovo witha group of scientists from the ChineseAcademy of Sciences.Early on, it was the hard-charging Mr.Liu who persuaded the Chinesegovernment to give the companygreater control over its hiring andsalary decisions, allowing thestate-owned company to raise capitalfrom outside investors and essentiallyoperate like a private company.Later, Mr. Liu won governmentapproval to list the company's stock inHong Kong and for Lenovo to startproducing its own computers, ratherthan simply marketing Western brands.By 1997, with its own brand of low-costChinese-character-friendly computers,Lenovo was suddenly China's biggestcomputer maker.Mr. Liu, a military academy graduatewho suffered through China's brutalCultural Revolution, said he often ranthe company with an iron fist, scoldingworkers who showed up late formeetings and pushing scientists andexecutives to deliver on their promises."All the people were scientists in thosedays," Mr. Liu recalled. "They werevery casual. They'd always be late formeetings and they'd make theirpromises. So we decided that if anyonewas late they'd stand up for oneminute."Along the way, Mr. Liu also groomed acadre of loyal and fierce executives,including Yang Yuanqing, 42, who isnow the company's chief executive, andMary Ma, 52, Lenovo's highly respectedchief financial officer.But just how the new company'smanagement will take shape in Beijingand New York is still unclear.Though he will step down after themerger, Mr. Liu, 60, will continue toserve as a member of the board.Mr. Yang, a serious-minded executivewho helped fire up the company's salesforce, will become chairman. Ms. Ma,who led the talks to acquire I.B.M.'s PCunit, is expected to remain as chieffinancial officer.Lenovo's challenge will be to meldradically different corporate cultures."Neither culture should be the de factoculture," said Martin Gilliland, ananalyst at Gartner Research. "Theyhave to start a new one. Can theydevelop a new Lenovo businessculture? That's one of the keys tosuccess."In recent years, Lenovo officials say thecompany's corporate culture hasevolved from what some companyofficials called the "semimilitary"culture that prevailed in the early days,to a more easy-going and hip high-techculture.These days, Lenovo's new corporateheadquarters in Beijing's "SiliconSuburb" is teaming with young 20- and30-somethings, casually dressed,chattering into mobile phones andlooking confident.The halls are decked with employeerecognition plaques, business schooltheorems and New Age philosophy:"Happiness," reads one workplaceposter. "Work hard and live art," readsanother.Newcomers to Lenovo are even trainedin the same kind of teamworkprograms that can be found atAmerican business schools, right downto the leaps of faith - the backwardfalling employee who is caught by ateam of supportive co-workers.And for those who need a jolt, eachmorning at 8:30 the Lenovo themesong is broadcast on loudspeakersthroughout the headquarters, urgingworkers to guide the corporate shipthrough perilous waters."Lenovo, Lenovo, Lenovo," one linegoes, "we are sailing through thewaves to lands far away. Lenovo,Lenovo, Lenovo. We are building a newsplendor."Lenovo is also seeking the best outsideadvice it can get, hiring a client rosterthat includes Goldman, Sachs;McKinsey & Company, the consultingfirm; Weil, Gotshal & Manges, the NewYork law firm; and Ogilvy, the publicrelations firm.And the new language for the companyis English, company officials say.Lenovo officials say they are studyingAmerican business history, and thechief executive lists The HarvardBusiness Review as part of his regularreading.In fact, like other computer andsoftware giants, Lenovo is even fanningits own myths. In 1984, the companywas formed in a small, concretesecurity guard's booth that became itsfirst laboratory and headquarters.The booth - part of the ChineseAcademy of Sciences - was torn downin 2001 to make way for a newbuilding. But it was soon rebuilt andnow sits like an empty artifactalongside the headquarters of Lenovo'sparent company, Legend Holdings.Critics now worry thawww.nytimes.comChinese Buyer of PC Unit Is Movingto I.B.M.'s HometownBy DAVID BARBOZABEIJING - Inside the shimmeringheadquarters of the Lenovo Group,China's largest computer maker,workers are carting birthday cakes overto three office cubicles.These days, every employee here getsa birthday gift, something amultinational company might beexpected to do in this age of feel-goodcorporate management.The problem is that people in China donot traditionally celebrate birthdays.But that is changing. And so is Lenovo.It is trying to become a global companywith its purchase of I.B.M's personalcomputer business for $1.75 billion,and handing out birthday cakes is justpart of the process of evolving into amultinational corporation.To further globalize the company,however, Lenovo will do somethingeven bolder: it will move itsheadquarters to Armonk, N.Y., whereI.B.M. is based, and essentially handover management of what will becomethe world's third-largest computermaker, after Dell and Hewlett-Packard,to a group of senior I.B.M. executives.American multinational companiesoutsource manufacturing to China. Whycan't a Chinese company outsourcemanagement to the United States?Executives at Lenovo - which getsabout 98 percent of its $3 billion inrevenue from China - are, in effect,acknowledging that they do not havethe necessary global experience to runthe new company."The most valuable asset we haveacquired through I.B.M.'s PC businessis its world-class management teamand their extensive internationalexperience," says Liu Chuanzhi,chairman of Lenovo and one of thecompany's founders.Indeed, few executives at Lenovo seemdisappointed by the move. In fact,many seem pleased to be buying into ablue-chip American corporation.After all, Lenovo - formerly known asLegend - may be the biggest computermaker in China, but the company is stillvirtually unknown outside of Asia.And top executives at Lenovo say theyare eager to learn how to run a globalcompany from their new colleagues atthe PC unit of I.B.M., which operates inmore than 150 countries and had $9billion in revenue in 2003.Preparations are already under way inBeijing. For the last few months, allvice presidents have been required tostudy English for at least one hour aday. The chairman says he has readbooks about Bill Gates and AndrewGrove. And the chief executive ofLenovo has agreed to give upday-to-day management of thecompany to assume the role ofchairman.His task will be to fly back and forthfrom Beijing to New York to consultwith Lenovo's newly named chiefexecutive, Stephen M. Ward Jr., thesenior vice president and generalmanager of I.B.M.'s Personal SystemsGroup.Many analysts were surprised byLenovo's decision to outsource itsmanagement to New York."I admire what Lenovo is doing," saidJoe Zhang, a UBS analyst who followsLenovo. "Many Lenovo executives havedecided to do this at the expense oftheir careers. They're putting personalego behind for the greater good of thecompany."People involved in the negotiations withI.B.M. said that Lenovo officials saw noother choice. They recognized thatLenovo could not simply take over amuch bigger I.B.M. PC unit and run itfrom Beijing.That is why a major theme of the talkswas how to keep business as usualafter the deal was completed, thosepeople say.While I.B.M. is full of M.B.A.'s, Lenovo -which is still partly government owned- has only two members of the seniormanagement team with an M.B.A. Andnone of the top executives have everworked for a multinational corporation.But analysts also say that Lenovo is nopushover. The company is consideredone of China's most successfulcorporations. For years, for example,Lenovo's brand has outsold Dell,Hewlett-Packard and I.B.M. computersin China.And even though it began as astate-owned enterprise, Lenovo hasalways been entrepreneurial, analystssay. It was one of the first companieshere to list its shares in Hong Kong. Itwas among the first to reward itsemployees with stock options, whichhave turned some of its top executivesinto millionaires.The company's identity was shaped, inpart, by its visionary chairman, Mr. Liu,who in 1984 helped found Lenovo witha group of scientists from the ChineseAcademy of Sciences.Early on, it was the hard-charging Mr.Liu who persuaded the Chinesegovernment to give the companygreater control over its hiring andsalary decisions, allowing thestate-owned company to raise capitalfrom outside investors and essentiallyoperate like a private company.Later, Mr. Liu won governmentapproval to list the company's stock inHong Kong and for Lenovo to startproducing its own computers, ratherthan simply marketing Western brands.By 1997, with its own brand of low-costChinese-character-friendly computers,Lenovo was suddenly China's biggestcomputer maker.Mr. Liu, a military academy graduatewho suffered through China's brutalCultural Revolution, said he often ranthe company with an iron fist, scoldingworkers who showed up late formeetings and pushing scientists andexecutives to deliver on their promises."All the people were scientists in thosedays," Mr. Liu recalled. "They werevery casual. They'd always be late formeetings and they'd make theirpromises. So we decided that if anyonewas late they'd stand up for oneminute."Along the way, Mr. Liu also groomed acadre of loyal and fierce executives,including Yang Yuanqing, 42, who isnow the company's chief executive, andMary Ma, 52, Lenovo's highly respectedchief financial officer.But just how the new company'smanagement will take shape in Beijingand New York is still unclear.Though he will step down after themerger, Mr. Liu, 60, will continue toserve as a member of the board.Mr. Yang, a serious-minded executivewho helped fire up the company's salesforce, will become chairman. Ms. Ma,who led the talks to acquire I.B.M.'s PCunit, is expected to remain as chieffinancial officer.Lenovo's challenge will be to meldradically different corporate cultures."Neither culture should be the de factoculture," said Martin Gilliland, ananalyst at Gartner Research. "Theyhave to start a new one. Can theydevelop a new Lenovo businessculture? That's one of the keys tosuccess."In recent years, Lenovo officials say thecompany's corporate culture hasevolved from what some companyofficials called the "semimilitary"culture that prevailed in the early days,to a more easy-going and hip high-techculture.These days, Lenovo's new corporateheadquarters in Beijing's "SiliconSuburb" is teaming with young 20- and30-somethings, casually dressed,chattering into mobile phones andlooking confident.The halls are decked with employeerecognition plaques, business schooltheorems and New Age philosophy:"Happiness," reads one workplaceposter. "Work hard and live art," readsanother.Newcomers to Lenovo are even trainedin the same kind of teamworkprograms that can be found atAmerican business schools, right downto the leaps of faith - the backwardfalling employee who is caught by ateam of supportive co-workers.And for those who need a jolt, eachmorning at 8:30 the Lenovo themesong is broadcast on loudspeakersthroughout the headquarters, urgingworkers to guide the corporate shipthrough perilous waters."Lenovo, Lenovo, Lenovo," one linegoes, "we are sailing through thewaves to lands far away. Lenovo,Lenovo, Lenovo. We are building a newsplendor."Lenovo is also seeking the best outsideadvice it can get, hiring a client rosterthat includes Goldman, Sachs;McKinsey & Company, the consultingfirm; Weil, Gotshal & Manges, the NewYork law firm; and Ogilvy, the publicrelations firm.And the new language for the companyis English, company officials say.Lenovo officials say they are studyingAmerican business history, and thechief executive lists The HarvardBusiness Review as part of his regularreading.In fact, like other computer andsoftware giants, Lenovo is even fanningits own myths. In 1984, the companywas formed in a small, concretesecurity guard's booth that became itsfirst laboratory and headquarters.The booth - part of the ChineseAcademy of Sciences - was torn downin 2001 to make way for a newbuilding. But it was soon rebuilt andnow sits like an empty artifactalongside the headquarters of Lenovo'sparent company, Legend Holdings.Critics now worry that Lenovo must finda way to preserve I.B.M.'s traditions ina PC industry of increasing competitionand commodity manufacturing.But Mr. Yang, Lenovo's current chiefexecutive, says not to worry."We are going to stick to the principlesof I.B.M. as a high-premium, high-valueimage, " he said. "We're not going tomake any compromises on this."t Lenovo must finda way to preserve I.B.M.'s traditions ina PC industry of increasing competitionand commodity manufacturing.But Mr. Yang, Lenovo's current chiefexecutive, says not to worry."We are going to stick to the principlesof I.B.M. as a high-premium, high-valueimage, " he said. "We're not going tomake any compromises on this."


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