Sun, Dec 26, 2004 - Page 11 News List

Lenovo to outsource management to US

EXPERIENCE As part of its process of evolving into a multinational corporation, Lenovo will essentially hand over its management to senior IBM executives

NY TIMES NEWS SERVICE , BEIJING

Inside the shimmering headquarters of the Lenovo Group, China's largest computer maker, workers are carting birthday cakes over to three office cubicles.

These days, every employee here gets a birthday gift, something a multinational company might be expected to do in this age of feel-good corporate management.

The problem is that people in China do not traditionally celebrate birthdays. But that is changing. And so is Lenovo. It is trying to become a global company with its purchase of IBM's personal computer business for US$1.75 billion, and handing out birthday cakes is just part of the process of evolving into a multinational corporation.

To further globalize the company, however, Lenovo will do something even bolder: It will move its headquarters to Armonk, New York, where IBM is based, and essentially hand over management of what will become the world's third-largest computer maker, after Dell and Hewlett-Packard, to a group of senior IBM executives.

US multinational companies outsource manufacturing to China. Why can't a Chinese company outsource management to the US?

Executives at Lenovo -- which gets about 98 percent of its US$3 billion in revenue from China -- are in effect acknowledging that they do not have the necessary global experience to run the new company.

"The most valuable asset we have acquired through IBM's PC business is its world-class management team and their extensive international experience," says Liu Chuanzhi, chairman of Lenovo and one of the company's founders.

Indeed, few executives at Lenovo seem disappointed by the move. In fact, many seem pleased to be buying into a blue-chip American corporation.

After all, Lenovo -- formerly known as Legend -- may be the biggest computer maker in China, but the company is still virtually unknown outside of Asia.

And top executives at Lenovo say they are eager to learn how to run a global company from their new colleagues at the PC unit of IBM, which operates in more than 150 countries and had US$9 billion in revenue last year.

Preparations are already under way in Beijing. For the last few months, all vice presidents have been required to study English for at least one hour a day. The chairman says he has read books about Bill Gates and Andrew Grove. And the chief executive of Lenovo has agreed to give up day-to-day management of the company to assume the role of chairman.

His task will be to fly back and forth from Beijing to New York to consult with Lenovo's newly named chief executive, Stephen Ward, the senior vice president and general manager of IBM's Personal Systems Group.

Many analysts were surprised by Lenovo's decision to outsource its management to New York.

"I admire what Lenovo is doing," said Joe Zhang, a UBS analyst who follows Lenovo. "Many Lenovo executives have decided to do this at the expense of their careers. They're putting personal ego behind for the greater good of the company."

People involved in the negotiations with IBM said that Lenovo officials saw no other choice. They recognized that Lenovo could not simply take over a much bigger IBM PC unit and run it from Beijing. That is why a major theme of the talks was how to keep business as usual after the deal was completed, those people say.

While IBM is full of MBAs, Lenovo, which is still partly government-owned, has only two members of the senior management team with an MBA. And none of the top executives have ever worked for a multinational corporation.

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