Lenovo's Legend Returns

Liu Chuanzhi built China's first global computer company. Now he's rebuilding it

By Michael Schuman / Beijing Monday, May 10, 2010
    • Illustration by Piotr Lesniak

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    Amelio sees the changeover differently, as a kind of graduation for the Chinese managers. When the IBM unit was acquired, Amelio says, its managers were not prepared to handle a global enterprise. After Amelio's three years at the helm, they had learned a lot. Liu's goal in altering the management system, Amelio says, was to give the Chinese executives greater say in the company's affairs: "The Chinese team was able to pick up its skills and manage in other countries." He also defends his performance, saying he put in place the proper strategy. "I stand by my record," he says.

    Liu's new management structure seems to have energized Lenovo — although a rebounding economy didn't hurt either. "The good news is, right now, they're in a good place," says William Grabe, a managing director at private-equity firm General Atlantic and a member of Lenovo's board. Wong Wai-ming, Lenovo's chief financial officer, says Liu's reforms have enhanced discussion among the senior executives and heightened the commitment among their subordinates. "Strategy-wise, there is a lot more clarity," he says.

    That's shown up in a flurry of recent initiatives. Realizing how the PC and mobile-phone businesses are converging, Lenovo in November repurchased a Chinese handset maker it had sold less than two years earlier.

    The company is also launching a slew of new products. Tapping into the growing demand for smaller machines, Lenovo this year introduced ThinkPad Edge, a line of light, powerful notebooks aimed at the small-business market, at a starting price of only $579 in the U.S. In May, Lenovo will begin marketing the Skylight smartbook — a cross between a mini-PC and a smart phone — and later the unique IdeaPad U1 hybrid, a notebook with a detachable screen that acts as a stand-alone tablet, much like an Apple iPad. The new product line "suggests at least that it's no longer the button-down, stodgy Lenovo of the past," says Bryan Ma, a computer-industry analyst at IDC in Singapore. "They are trying to push themselves ahead of the curve."

    Liu believes the Lenovo way can be the path for other Chinese firms as well. He intends to transform Legend Holdings — an investment firm that is Lenovo's largest shareholder — into a holding company, which, through acquisitions, would collect a stable of firms in industries such as energy, biopharmaceuticals, information technology and environmental protection. Then Liu and other lieutenants at Legend would work with the executives at the acquired companies to help them raise capital, strengthen strategic planning and improve everything from supply-chain management to human-resources practices. "For the Chinese economy to really rise, one of the key drivers will be capital from the private sector," Liu says. "We can find and identify the best people and use our funds and our experience to help them so their companies will grow very fast."

    Lenovo, however, may remain Liu's biggest test. The company returned to profitability in the second half of 2009, and it is aggressively pushing into emerging markets, where, by using its experience in China, managers believe they might hold a special advantage. Lenovo's PC shipments surged 58% last quarter from the same period a year earlier, while the total market grew 24%, according to IDC.

    Come back after Lenovo posts more results, Liu says, and "you could say at that time the Lenovo method works." Wong, the CFO, expresses greater optimism. "Mr. Liu learned the hard way," he says. "This is the way he survived, and he won." For the sake of corporate China, Liu must keep winning.

    Smart Move. Lenovo expands its line as it expands its reach

    Lephone
    Designed to capture China's emerging smart-phone market; not yet priced







    Thinkpad Edge
    Created with features for the small-business owner; $649 for the 14-in. model







    Skylight Smartbook
    With a 10-in. screen and weighing under 2 lb., it's a netbook in disguise; $499







    Ideapad U1 Hybrid
    Detach the screen, and it's a tablet; pop it on, and it's a notebook; about $999







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