The Great Laptop Forward
We’re in a Hyundai Sonata with seats covered in spotless white cloth; two P.R. guys, Americans, are fidgeting in the backseat as Beijing National Stadium, nicknamed the bird’s nest, looms over us. The centerpiece of the city’s 2008 Summer Olympics looks like a condo for a giant pterodactyl, but the P.R. guys are in no mood for sightseeing—they’re getting more nervous as each minute passes. We’re on our way to meet Bill Amelio, the U.S.-bred C.E.O. of Lenovo, China’s biggest technology company, and we’re running late. Amelio cultivates an image of being an impatient, no-nonsense boss. In less than two years, he has whipped Lenovo into shape, or at least that’s what a 625 percent profit increase this past fiscal year indicates. As Andrew Hu, who runs China operations for the software company Red Hat, says of Amelio, “His style is simple. He’ll tell you, ‘I have five minutes, and if I like what you’re saying, I’ll give you another 20.’ I know what kind of driver he is in traffic.”
So ...making Amelio wait is probably a bad thing.
Our Chinese driver, trying to squeeze up to a tollbooth, plays chicken with Volkswagens, Citroëns, buses, cement trucks, and slender Chinese-made microvans that would get nothing but black dots in a Consumer Reports rollover test. We could walk faster.
We nudge past the toll station, a salute to China’s abundance of labor. At least 20 workers in orange vests stand around doing nothing but looking at the cars. We gain a bit of speed as we pass another reminder of the nation’s unfathomable mass of humanity: construction cranes assembling nearly identical 40-plus-story apartment buildings and hotels from here to as far as the eye can see—which is not all that far, thanks to Beijing’s persistent white smog.
Turning off the highway, we mix with bicycles, cars, and scooters, passing a watermelon stand (Beijing has excellent watermelon) and a building with a large sign that reads, in English, wool spinning city. We’re 10 minutes late, going on 15.
We swerve around a bus sporting an advertisement that translates as “Change your habits. Wash your private areas.” The Hyundai turns into a cluster of buildings that could be a clone of a Silicon Valley corporate park, if American employees rode to work on their grandfathers’ bikes. We’re now nearly half an hour late. One of the P.R. guys frantically text-messages our position to headquarters.
Finally, the car pulls up to Lenovo’s front door, and we pile out like commandos. Go, go, go! We scurry through the glass-and-steel lobby, past a fountain, across an oasislike campus of grass and more fountains, go up in the elevator and into an open space of low cubicles, around a corner, into a tidy conference room set aside for the interview—and Amelio’s not there.
“He’s in traffic,” a petite young woman apologizes. “There was an accident.”
China desperately wants the world to respect its economic prowess. It wants respect for its brains and class, the kind you’d give Bill Gates or Frank Sinatra—or, for that matter, the ancient Chinese, who invented paper, gunpowder, and spaghetti. Right now, China is respected mainly for its massive size and cheap manufacturing, which feels vulgar, like the deference paid to Mike Tyson in a barroom. And recently, cheap manufacturing has actually cost the country lots of respect, on account of China’s selling the world tainted toothpaste, toys with lead paint, and pet food that kills pets.
So China needs a corporate hero—a global breakout brand. Sony did it for post-World War II Japan. Samsung led the way for South Korea two decades ago. Nokia put Finland on the map.
China is betting big that Lenovo can make the great leap forward. The computer maker will be a top-level sponsor of and the sole hardware technology supplier to the Olympic Games that are coming to China in August 2008. Between now and then, Amelio and his team will plow hundreds of millions of dollars into making sure the Beijing Olympics are Lenovo’s golden moment. So much has to go right for the company for this to happen—hot new products, smart branding, a U.S. retail presence that doesn’t yet exist, and two weeks of Olympic events that come off without a technological hitch.
What would that mean to the United States and the rest of the world? Like Sony in Japan, Lenovo could lead an entire nation toward global competitiveness, creating a new threat to other computer companies. In the short term, it means Western consumers are about to see a river of products and TV commercials from Lenovo.
The two still-very-nervous P.R. guys and I have been waiting in the conference room for 20 minutes when Amelio finally strides in. His cell phone instantly rings. He answers with the standard Chinese greeting ni hao but continues in English. (He does not speak much Chinese.) He’s back off the phone in about two minutes and gives me the look that says “You’ve got five minutes . . .” Since Beijing’s traffic didn’t appear to faze him, I ask if the burden of carrying China to a new level in the global economy stresses him out. Amelio doesn’t flinch.
“I don’t feel any pressure about that,” he says, looking slightly amused, his eyes confidently fixed on me. “One of the exciting reasons I took this job is that this hasn’t been done before.”
Some might argue that Lenovo is as Chinese as a P.F. Chang’s China Bistro.
A little history: Lenovo was founded as Legend, in 1984, by Liu Chuanzhi and soon began distributing Hewlett-Packard products in China. Legend evolved into a PC maker and, in 1994, went public on the Hong Kong Stock Exchange. The Chinese government’s Academy of Sciences at that time owned 50 percent of the company; it still owns approximately 27 percent. “Legend was like China’s version of the H.P. garage in Palo Alto,” says Red Hat’s Hu.
In 2001, Liu named his protégé, Yang Yuanqing, as C.E.O. By then, Legend was China’s biggest technology company, a position it retains today. China’s Ministry of Information Industry ranks Lenovo as No. 1, followed by Haier Group (whose revenue is 22 percent less than Lenovo’s) and Huawai Technologies (which is half Lenovo’s size).
In the wake of China’s dotcom crash in 2000, growth in the country’s PC market slowed, so Lenovo diversified into cell phones and MP3 players. “The end result was not very successful,” Yang told me in 2005. Lenovo couldn’t beat Nokia, Motorola, and Samsung, so Yang shifted strategy, expanding Legend’s PC business globally. The company changed its name to Lenovo because Legend couldn’t be trademarked in the West. Then, Yang said, “I.B.M. knocked on our door.”
Since 2000, I.B.M. had periodically been looking to sell its money-losing PC division to Lenovo. Lenovo at first wondered if I.B.M. was trying to dump a clunker of a business on the Chinese. But then Lenovo’s former chief financial officer Mary Ma took a hard look and decided that I.B.M.’s PC division came with two valuable prizes: ThinkPad, a powerful laptop brand in corporate markets, and a cadre of well-trained American managers who could teach the Chinese a thing or two about global business—such as how to manage a multinational corporation and market products around the world. In 2005, Lenovo paid I.B.M. $1.3 billion for its PC group, the biggest buyout of a U.S. operation ever by a Chinese company. After the merger, Yang appointed I.B.M. executive Stephen Ward to be C.E.O. Yang became chairman and moved to Raleigh, North Carolina, where Lenovo has its U.S. headquarters.
Ward—who spoke often about values and vision—was probably the right guy to handle the delicate melding of Chinese and American business cultures. “He was much more collegial, with a slightly higher-level approach to problems,” says Peter Hortensius, who has run the ThinkPad unit since coming to Lenovo from I.B.M. at the time of the merger. But analysts and Lenovo executives say the company faltered under Ward. It wasn’t growing much. Supply chains broke down. Costs were too high. The product line lost focus.
In December 2005, Yang pushed Ward out and brought in Amelio, who had previously run Dell’s Asia-Pacific operations. “He is a very intense, focused man who wants to win,” Hortensius says of his current boss. Amelio puts a few items on a to-do list; then he does them. He will zero in on a problem and hound executives until it’s fixed. Amelio, Hortensius says, is “exactly what Lenovo needed.”
For now, Amelio’s Lenovo has reclaimed its No. 3 spot among the world’s PC makers, behind H.P. and Dell. (In the U.S., Lenovo has a minuscule market share, behind even Toshiba’s.) By the end of the second quarter of this year, Lenovo had pulled ahead of Taiwan’s Acer, according to the I.T. consultancy International Data Corp., though Acer’s merger with Gateway, announced in late August, may vault the Taiwanese firm back in front.
Amelio consolidated Lenovo’s suppliers and factories and narrowed the product line. He signed up resellers to hawk Lenovo desktops and laptops in Europe, and for the first time, the company made money in every geographic region in which it does business. Lenovo’s net profit for the fiscal year ending March 31 shot up to $161 million, from $22 million the year before.
But PC manufacturing remains a tough business, thanks to constant price cutting. One sign of how intense the competition is: In April, with yearly profits up 625 percent, Amelio laid off 1,400 workers to further streamline operations.
China is betting on Lenovo, but not all Chinese think it’s a lock. Tech entrepreneur Jack Zhang, who runs the Chinese equivalent of Facebook, has his doubts. We meet in a restaurant in a tiny courtyard deep in an old Beijing alleyway, a place chosen, apparently, for its atmosphere. The customers dine at folding card tables, seated on plastic stools in primary colors. Zhang uses his chopsticks to pull a chunk of flaky white fish out of the metal chafing dish on the table. The spicy vegetables and peppers smothering the fish could make one’s tonsils combust. After noticing the sweat beading on my forehead, Zhang points at pieces of something red and says, “Yeah, don’t eat those.”
Zhang’s site, Zhanzuo.com, has 3 million members, he tells me. It is funded, in part, by the Silicon Valley venture capital firm Sequoia Capital. In a loose white shirt and jeans, with tousled hair and a Clark Gable-esque glint in his eye, Zhang has the air of a business swashbuckler.
His generation, he explains, thinks of Lenovo the way Steve Jobs thought of I.B.M. a couple of decades ago. Lenovo is big and slow and makes commodity hardware that, these days, is about as thrilling as plumbing fixtures. “The real excitement in China is not Lenovo,” Zhang says. “It’s companies like us, or Baidu”—a Chinese internet search firm. He could have added Chinese internet game company NetEase or local instant-messaging giant Tencent Holdings. These ventures attracted outside investors, took wing with the hypergrowth of China’s internet industry, and went public on the Hong Kong Stock Exchange or Nasdaq.
Zhang doesn’t sound all that interested in whether Lenovo will have an Olympic breakout. And that raises a legitimate question: Can any firm ignite consumer lust—or can that only happen when a company strikes a new market at the right moment? Sony nailed miniaturization; Nokia, mobility; Toyota, small cars in the wake of an oil crisis; and Google, instant information. Lenovo addresses only existing, mature markets. Even Amelio admits that PCs, desktop computers, and corporate servers are treated mostly as tools—necessary gear for life in the 21st century.
Although there have been exceptions: Starbucks didn’t invent coffee.
Amelio used to wrestle for Lehigh University, and at 49 he still has the bearing of a guy who might enjoy pile-driving an opponent into the mat. He has a short, neat beard and eyes that lock onto whomever he’s talking to like a sniper’s laser sight. On this day, he’s wearing a light-blue dress shirt—no jacket—with a wild red tie that could’ve been designed by Pablo Picasso and Jerry Garcia. He always seems to speak in an even, friendly tone, yet it’s one that conveys absolute certainty.
He has that same burnished-steel confidence in his voice as he talks about Lenovo’s current challenge: pushing consumer PCs and laptops into the U.S. market starting in early 2008.
Lenovo does well in the United States selling ThinkPad laptops directly to businesses, but the company sells no consumer-oriented computers in the U.S., and there’s no indication that retailers are dying to clear shelf space for them. The big gorilla of computer retailing, Best Buy, has “no immediate plans” to carry Lenovo consumer PCs, though “the door is always open,” says spokesman Jeff Dudash. Forrester Research analyst Simon Yates, who follows Lenovo and the rest of the PC industry, says, “You’ve got to have a stomach of steel to go into the U.S. consumer retail market.” Lenovo is still negotiating with sellers and will have to offer them unique products, deep discounts, consumer rebates, and some reason to believe its PCs will move off shelves faster than those of established brands. Forrester’s research indicates that Lenovo probably has the money and savvy to gain a retail foothold in America, but probably not in 2008.
Lenovo also runs no consumer ad campaigns in the United States and has little brand recognition. Consider the potential for confusion: In Western markets, some versions of the Lenovo ThinkPad X60 still have an I.B.M. logo in the bottom-right corner. As part of the merger, Lenovo acquired the right to take up to five years to complete the transition from the I.B.M. brand to Lenovo—which means that many ThinkPad owners have no idea who really made their laptops.
In China, the situation is flipped. Lenovo owns more than 30 percent of the market and sells a broad line of consumer desktop and laptop computers under the Lenovo label. ThinkPad is the stepchild brand.
Yet if Lenovo wants to use the Olympics to vault its name to world-class status, it must have products widely available in America by the time the Games begin. To win consumers away from existing PC brands and make a splash in the West, Lenovo’s PCs will have to be, as Amelio says, head-turners.
“We are going to get people excited,” Amelio promises. As a fresh U.S. brand, he says, “we have an opportunity to take a position that nobody’s been able to take other than Apple.” He describes offerings such as a $5,000 luxury laptop—with a hand-stitched leather shell—that comes with access to a “concierge” V.I.P. help desk for fixing problems and setting up software. In India, Lenovo is selling a laptop that uses face recognition instead of a password for security.
At Lenovo’s R&D center, some of the products on display stretch boundaries. A tablet-style laptop called Yoga has a leather cover and a screen that can be opened into more positions than a typical model’s—hence the name. The futuristic-looking Victory desktop unit is reminiscent of Apple’s Mac Mini—a brick-size computer with a funky swivel screen. A cute red laptop, co-branded with Coca-Cola, is covered with the word Coke in dozens of languages.
Here’s Lenovo’s plan: Its computers will start trickling into U.S. stores in early 2008. A broader line will be available in time for the Olympics blitz. The marketing is supposed to drive people into stores to swoop up the company’s offerings and make Lenovo a well-known name.
“If it all comes together by the time we hit the Olympics, it will be a real crescendo for us,” Amelio says.
But American tech consumers light up over groundbreaking gadgets like Apple’s iPhone and Nintendo’s Wii—not so much for desktop and laptop PCs. Lenovo’s products look cool and have interesting features, yet they don’t pop out as radically new. For that matter, Lenovo is not likely to be the only computer company trying to grab a bigger market share with better designs and service. A 2007 Forrester report, “The Age of Style in Consumer PCs,” forecasts that just about every major PC maker will be doing the same thing in the next few years.
Some observers doubt Lenovo has the product line and branding muscle to become an industry leader. Carlos Bhola, a tech investor with Celsius Capital in Shanghai, says, “Even with the boost of the Beijing Olympics, it’s a stretch for Lenovo to think it will be on the same level as Sony or Nokia.”
Late in the afternoon, our Hyundai with the white-covered seats and the two P.R. guys leaves Lenovo behind and crawls back into traffic. A breeze carries away the smog, and a blue sky appears. We pull up to the headquarters of the Beijing Organizing Committee for the Olympic Games. The homely tower has the dull sheen of cheap silverware.
Inside, we enter a room the size of a basketball court, chopped into dozens of cubicles, each lined with 20 or so Lenovo desktop computers and monitors. A sign above each cubicle shows an image of a sport: swimming, cycling, soccer. This is the test site for Lenovo’s Olympics technology, which will store everything from scores to athletes’ medical records.
The Olympics will be a Lenovo showcase, using about 15,000 of its computers tended by 400 of its technicians. With the Games practically in its backyard, the PC maker will wine and dine potential customers and resellers and let them see how its products can run a complex operation. That means the Games have to come off without a technological hitch. I.B.M., after all, got a boatload of bad publicity when its computers failed at the 1996 Summer Olympics in Atlanta. Lenovo, which does not have the kind of reputation that helped I.B.M. survive its Olympics crisis, would be knocked out of the ring if its technology crashed in front of a few billion TV viewers globally.
“I’m lighting candles,” Amelio jokes. “We had a great run in Torino.” Lenovo’s computers powered the 2006 Winter Games in Italy. But those Olympics had less than half the scale and complexity of the Summer Games. “We’re humble. We’ll have checks and triple checks to make sure it doesn’t blow up in our face.”
Aside from providing technology, Lenovo is a top-level sponsor of the Beijing Games—the first and only Chinese company in that position. The amount paid for Olympics sponsorship, which included the last Winter Games, has not been revealed, but estimates put the figure in the $100 million range. Lenovo is buying its way into an exclusive club; other top-level sponsors include Johnson & Johnson, Coca-Cola, McDonald’s, and Samsung. “We’re learning a lot from the other sponsors,” says Alice Li, Lenovo’s vice president of Olympic marketing. “We’re making friends with global executives. They’re all being very nice to us.”
Leading up to the Games, Lenovo will air Olympics-themed ads worldwide. As part of its sponsorship, it gets to slap the Olympic rings logo on its products and ads. Lenovo won a competition to design the Olympic torch, and that will fuel a round of marketing and publicity during the 130-day torch relay leading up to the opening ceremony. During the Games, Lenovo logos and machines will be seen in the broadcast booths with TV sportscasters from many nations. The brand will appear on signs at numerous events. “You won’t be able to go on any street corner without seeing Lenovo plastered somewhere,” Amelio says. “It will be ubiquitous.”
Lenovo won’t say what it is spending on all this marketing, but keep in mind that the company is a fraction of the size of its top-sponsor brethren. “It’s hard to give exact numbers. Everything I do in marketing will have the Olympics infused in it,” says Deepak Advani, Lenovo’s chief marketing officer. But, he admits, “we’re really not matching dollar for dollar what others are spending.”
Lenovo looks at the numbers this way: About 4 billion viewers around the world watch the Games on TV, and 1.7 million visitors will come to Beijing to see them live. They will all be repeatedly exposed to the Lenovo logo. And during the Games, Lenovo will host 800 international and 2,000 domestic guests.
“Barring some unforeseen disaster, it should pay off for Lenovo,” says Forrester’s Yates. “If it flops—well, then that would be a major flop for Lenovo.”
Sometime after the last gold medal has been awarded, the last national anthem has been hummed, and the Olympics-themed ad campaigns end, Lenovo will be...what, exactly?
“I’d like us to be seen as a full-fledged I.T. company—desktops, laptops, workstations, servers in every market segment,” Amelio says. “A household name, from the consumer point of view, all the way up to being a premier name in commercial markets.”
In other words, like Dell, Amelio’s previous employer. The breakout company China is counting on sounds a lot like one that already exists in Round Rock, Texas, run by an American. That bit of corporate imitation might bring success in the technology business, but it will probably not bring China the kind of respect it so desperately craves.




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