Go..Lenovo!

[Liang1a]

Lenovo buying IBM is a bad idea.

When the question of whether it was a good idea for Lenovo to buy the PC section of IBM first came up I wasn’t sure whether it was a good idea or not. I had said that it depended on whether Lenovo could get solid benefits from IBM in developing a new PC that Lenovo could not do on its own. Frankly, I suspected and I still suspect that Lenovo could develop as good a new generation of PC, if not a superior one, by spending the $2 billion on R&D inside China employing Chinese scientists or engineers or hiring foreign scientists and engineers with critical knowledge.

It is quite clear that Lenovo is already being very competitive against IBM inside China. It is also very clear that IBM’s PC business is dying in the US due to many reasons such as inferior technologies, high cost, and intensifying competition from other competitors such as Dell, Compaq, HP, etc. Even Lenovo with comparable technologies and cheaper cost could compete favorably against IBM inside the US. Therefore, there doesn’t seem to be much that Lenovo could gain in buying IBM since Lenovo is already competitive inside China and IBM is becoming uncompetitive inside America.

A sign that the PC market is becoming saturated and could not be expected to grow in the US is the fact that the chief executive of HP has just been forced to resign for buying Compaq which turned out to be a money losing proposition. As most Americans have already owned a computer and fewer computers will be sold in the US, there will be less demand. This is not the best time for China to try to enter the American PC market especially not on the back of a dying PC company that is rapidly losing its customer base and apparently have no new technologies to make its PC’s cheaper and competitive.

Furthermore, it is unclear whether Lenovo is buying IBM or IBM buying Lenovo since a lot of the so-called purchase price includes a large chunk of Lenovo stock and the Lenovo headquarter is being moved to the US. In fact this is a very astute move for IBM since it is giving up the US market where it is obviously being closed out and gaining the Chinese market which can be expected to continue to grow for many decades to come. So Lenovo is actually being tricked into trading its expanding Chinese market for the diminishing US market.

In the final analysis it is a very bad idea for Lenovo to buy IBM’s PC business. I condemn this deal as a senseless waste of China’s foreign exchange and a traitorous selling out of China’s domestic market. The recent hogwash of the American government’s objection to the deal because the new headquarter of Lenovo is located in some sensitive building is just hogwash and pure propaganda to make the Chinese people think that there might be some political advantage to be gained since there is obviously no economic advantage in this sorry deal. I would like to warn the Chinese people and the Chinese government that this is just another reverse psychology trick to make this lousy deal look appealing. The Chinese people should see it for what it is - a stupid sell out - and call on the Chinese government to reject it.

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This article may be re-posted provided attribution of source is given.

[Sen]

you shouldn't worry too much, it's blocked by US government.

it's not really about technology, Lenovo is not inferior to IBM, it's about branding Lenovo has to expand into international markets, but will US customers recognize Lenovo? unlikely...

well you said that PC market is almost saturated. in fact there's little room for Lenovo to grow in chinese market, other chinese PC makers sell their PCs at a more competitive price, and international giants are also expanding into chinese markets, Lenovo has to go international, one way or the other.

[Grygry]

Originally Posted by Liang1a

Lenovo buying IBM is a bad idea.
I had said that it depended on whether Lenovo could get solid benefits from IBM in developing a new PC that Lenovo could not do on its own. Frankly, I suspected and I still suspect that Lenovo could develop as good a new generation of PC, if not a superior one, by spending the $2 billion on R&D inside China employing Chinese scientists or engineers or hiring foreign scientists and engineers with critical knowledge.

Actually, Lenovo would buy a pc mountler, not a pc maker. There's no technology in this activity, unless you do your own motherboards like ASUS... So this investment is purely commercial.
Lenovo has the means to cut the production costs by having more worke done in China, so it might be one of the only companies able to make profits out of this IBM's dying business. So they must have bought this for a correct price.
Concerning the high tech developemments in pc's technologies, filling a technological gap would cost a whole lab plus a whole production line, maybe more than 20 bn US$... Although economically and politically meaningful, this is a long term investment that only a national programme could feed. Maybe it's wiser fof Lenovo to concentrate on what it's able to do, and look for more advanced productions like printers, and pc related activities at the same time...

[Liang1a]

Maybe it's wiser fof Lenovo to concentrate on what it's able to do, and look for more advanced productions like printers, and pc related activities at the same time...

There are a lot of technologies that Chinese companies could not do such as logic chips, memory devices, disks, etc. I think it would benefit Lenovo more to buy AMD for its technologies in CPU chips and other essential technologies. Right now Chinese companies are paying a lot of liscencing fees for all kinds of components which make Chinese electronic products very expensive.

Furthermore, foreign companies such as Toyota have been able to break into the US market because they have achieved a reputation for good products at attractive prices. Lenovo could do the same over the long term by selling superior PCs at cheaper prices than any American PC producers in the US or anywhere else int the world.

[Liang1a]

well you said that PC market is almost saturated. in fact there's little room for Lenovo to grow in chinese market, other chinese PC makers sell their PCs at a more competitive price, and international giants are also expanding into chinese markets, Lenovo has to go international, one way or the other.

China's PC market is actually very small considering China's huge population. The reason why China's market is so small, not only in PC's but in just about every kind of consumer goods, is that the internal market is almost undeveloped. I think China could grow by 800% over the next 30 years if the Chinese government paid attention to expand its internal economy. But the expansion of the internal economy means the implementation of the urbanization of the farmers which constitute 70% or more of China's population. And as long as vast sums of money and resources are squandered each year to subsidize cheap exports China's internal economy will not grow robustly if at all. China's GDP of 9% plus is actually inflated by large sums of FDI which amounted to some 5% to 6% in 2004. Take that away and you can see that China's economy is not growing at all.

[postmodern]

Well, I hate theoreticians talking this and talking that, grow up as an entrepreneur and u'll have a say. This is indeed the problem that China is facing, everybody wants to talk about this and that, nobody puts into practice, haven't we had enough of such ppl? Get fuckin' business then make ur own strategies.
1. Economic structural changes should be made and will be made gradually. This is not as easy as other reforms, couse it's a structure. U'll consider ur supply chains and capacities. For example, Chinese automakers won't make any positive move until China stops importing special steels for car manufacturing, this is not the problem of car makers;
2. a company needs growing space for a start to make strategic shifts, the room for growth, as most of the Chinese businesses need, is capital, sustainable and manageable capital to make a future, simplified and undivided concentration is the best risk management for starters;
3. every successful business is run with simplicity, a business should follow the market trend, but shouldn't be ever-changing;
4. a business' operating range has something to do with the industrial structure of one country, and is decided by it;
5. internal changes of a business are directed by market trend, but unless you get things ready: money, elites, and management modes;
6. accumulation is necessary, as long as you can make significant profit, who cares to make business changes, capital accumulation is key to future strategic changes;
7. Chinese entrepreneurs are greenhands, they need time and experience, especially when China's market is so immature;
8. industrial R&D has to be coherent with academic R&D, you can't expect companies to do all the research works, otherwise it is a big waste of money to feed u theoreticians, Chinese universities and academies have to make a lead in theory then companies will follow.
Other reasons have been interpreted so I won't repeat.

[Liang1a]

grow up as an entrepreneur and u'll have a say. This is indeed the problem that China is facing, everybody wants to talk about this and that, nobody puts into practice, haven't we had enough of such ppl? Get fuckin' business then make ur own strategies.

The job of the entrepreneur is to maximize his profits any way he can. This is the reason why you have Enrons and Martha Stewart. It is also the reason why Chinese business is so corrupt. It is up to the government to implement policies that will channel economic activities in the right direction.

It is the business of the exporters to do as much exports as possible. Benefits to the Chinese economy as a whole is not his concern. Similarly, it is the business of the importers to maximize his profits. And if soybean importers can reduce Chinese soybean production to zero and allow them to import all the soybeans China needs then that is what they will do regardless of the harm to the Chinese economy. It is obvious therefore that it is stupid to leave everthing up to the entrepreneurs to make their "own strategies" to enrich their "fuchin' business" anyway they can.

[Liang1a]

1. Economic structural changes should be made and will be made gradually. This is not as easy as other reforms, couse it's a structure. U'll consider ur supply chains and capacities. For example, Chinese automakers won't make any positive move until China stops importing special steels for car manufacturing, this is not the problem of car makers;

"Stop importing" or "start importing"? Are you saying Chinese car makers need special steel that they now lack? If Chinese car makers need special steel why must they import them? Why can't the Chinese steel makers make these special steel? And if the Chinese steel makers can't produce these steel, isn't it all the more reason for China to accelerate its R&D so that it could produce all the hi tech products it needs?

And why is it so hard to change the "structure" of the Chinese economy? This is just a meaningless excuse. The hardest thing to do is educate a large number of scientists and engineers and the advancement of hi tech. Everything else could be changed almost instantly provided there is competent leadership.

And as to car making in China, the biggest problem is not steel or anything else. It is the simple fact that Chinese car companies just plain not having the advanced technologies to develop a competitive car. And until and unless China educated more science and engineering doctorates and allocated more fundings for R&D China will not have the hi tech needed to develop competitive cars. And unless and until China can develop competitive cars its car industry will not advance. So it is foolish to talk glibly about the difficulty of making "structural changes" and start making fundamental changes that ultimately underlies all economic advancements.

[postmodern]

OMG u don't know how a business runs and how the industrial structure looks like do u.
First off, right, government shouldn't impose stark macroeconomic controls on Chinese eenterprises, that's the cause of corruption, and of course low productivity/profitability, but how does it have something to do with business level strategies? Can an enterprise(Lenovo) run out of government's macroeconomic controls? It's the eternal law for entrepreneurs to follow government's directions, otherwise go somewhere else where ur enterprises can make the largest profit(that applies to the most free market economies) without government interventions;

secondly, a simple example. If mathematicians lag behind of physicists, physicists can do nothing. In the automaking industry, steel is the basic of manufacturing a car. When you stop importing steel from South Korea(there have been no alternatives course you don't have the steel-making techniques), you'll have the possibility to develop your automaking industry, im not in the business so I cannot list all of the supply chains, but at least you should have some basic knowledge that automakers don't produce steel, ok? They design cars with bought raw materials and parts, machine tools then assemble, that's their task, not every part of a car is made by automakers. And that's exactly why there is a supply chain. You control the costs of parts, you have a say in the industry. People who make the biggest profit are not basic parts or components producers, but the assemblers, one simple example Boeing. Again automakers have no fuckin' thing to do with steel producing so how far they can go is decided by their related fields, supply chains. An automaker can't finance all the steel, machinery parts, electronics, computers, decoration, tires, bearings researches. So businesses can live better in a country where there is a more complete industrial chain. Leave those research works to universities and academies. The Chinese industry so shitty is mainly because industrial relations in Chinese universities r next to non-existent, education and industry r too far apart. Also, enterprises invest little in higher education.
What's R&D? You'll have to got advanced R&D in academies first then industry can put it into practice. How do you expect application level R&D to be ahead of theory R&D. but, the Chinese government don't give a fuck about investing in education, it just wants students go abroad and learn advanced techniques then come back to boost the economy(that's what happened in TW and it was a successful story to some extent). Some people have to sacrifice(go pay for education urself) to help develop the country. Chinese shipbuilders now can produce world third most ships, but how do they build ships? Using laggard techniques and foreign CAD softwares? There won't be any breakthrough as long as the status quo persists, but is it all their fault?
IT. Nobody else has a complete IT industry except for the US, but don't other countries develop their IT industry? Everything is computerized now, so you virtually don't need to develop anything because you don't have a complete industry? The most important substance, in the business world now, is that if you can control a level in the hierarchical industry, you'll have the chance to win a ticket entering into a profitable club. Cellphone cameras are made by one or two firms, is it high tech? It's the rule of the business world. To pursue maximal profit, you must consider what's worth and what's not, narrowing ur business range is a fundamental way to cut off costs, hence bigger profit.
Changing economy structure, or more exactly industrial structure is a huge project, it must be implemented carefully and gradually. Japan has a high-tech leading economy, you envy? It has met its structural problems, they'll be in stagnancy or recession still unless these problems get fixed. Once the basic structure of Chinese economy is formed, Chinese economy will be more resistable and stable. Manufacturing is still the main concern of Chinese economy, since there's huge population needing to be fed. Some Chinese cities can be highly automated today, but we don't automate them, why? For population's sake. Everybody gets less income, everybody has a job(and overall unemployment is still around 20%). I can promise you we can surely computerize our industry, but where do people go when we employ lots of robots? Chinese entrepreneurs are still not that capitalist to not consider labor population's feeling, making profit is not the only concern, easing up of social pressure is a responsibility.
No pains no gains. The only way to fully develop an enterprise is going international. If you don't know global trade rules and introduce advanced management modes and good enterprise culture, you'll still pay for that some days later.

[Sen]

Originally Posted by Liang1a

China's PC market is actually very small considering China's huge population. The reason why China's market is so small, not only in PC's but in just about every kind of consumer goods, is that the internal market is almost undeveloped. I think China could grow by 800% over the next 30 years if the Chinese government paid attention to expand its internal economy. But the expansion of the internal economy means the implementation of the urbanization of the farmers which constitute 70% or more of China's population. And as long as vast sums of money and resources are squandered each year to subsidize cheap exports China's internal economy will not grow robustly if at all. China's GDP of 9% plus is actually inflated by large sums of FDI which amounted to some 5% to 6% in 2004. Take that away and you can see that China's economy is not growing at all.

so true..if you dont attract foreign investment no one would build factories..famers won't come to cities everyone stays in poor..who can afford the products? how do you develop internal chinese market?

[Liang1a]

OMG u don't know how a business runs and how the industrial structure looks like do u.

I know what a structure is. I just don't know if you and I are thinking of the same thing. To give you an example:

There is much talk about converting to the hydrogen industry. The main element of this is the fuel cell cars. But there is no distribution system in place to sell hydrogen the way gasoline is being sold. So the lack of an efficient system to retail hydrogen is a structural problem in the implementation of the hydrogen industry.

Tell me, are we talking about the same thing as far as "industrial structure" is concerned?

[Liang1a]

OMG u don't know how a business runs and how the industrial structure looks like do u.

You might also be talking about the economic structural which would concern the entire economic philosophy and structure of the social economic structure. For instance, under the communist system there is not supposed to be private property ownership. So the "structure" of the Chinese social economic system have evolved over the last 20 years or so to allow the operation of private enterprises. The household registration system that used to keep the farmers in the old days are being, or have been already, revised to allow greater freedom of movement of the Chinese people everywhere. This is an example of a structural change in the Chinese social economic system. If you mean by "industrial structure" anything else, maybe you can explain it to us.

[Liang1a]

so true..if you dont attract foreign investment no one would build factories..famers won't come to cities everyone stays in poor..who can afford the products? how do you develop internal chinese market?

The biggest fallacy that I've been trying to debunk is the false assumption that Chinese economic development is directly related to foreign investment. There is absolutely no rational logic to substantiate this assumption.

Factories are built because there is demand for the products that the factories product. And the demand would increase only if there in an increase in the money supply based on the increase in the productivity of the workers. There is absolutely nothing in this equation about foreign investments.

Therefore, if the demand came from overseas then the factories will produce products for export. But where is the logic that demand can come only from overseas? If the demand comes from the domestic market then factories will be built to produce products for domestic consumption. This is simple logic. And the best way to stimulate domestic demand is to increase the productivity of the Chinese people.

Unfortunately, this is a old conundrum of chicken and the egg. Obviously before factories could be built to produce products there must be demand. But the demand could not increase if there are no jobs in the factories. This is the reason why almost all the people believe that there must be factories to product products for export because that is where the demands are. But the Chinese government could bootstrap the Chinese economy by doing the urbanization project to relocate some 1 billion Chinese farmers to the urban areas over the next 30 years. This will vastly increase demand in almost everything thus providing the initial stimulus to get the internal market started. Once the domestic demand starts to expand then more jobs will be created to increase the supply. The additional jobs will lead to increased purchasing power which leads to addtional demand which leads to more jobs to increase the supply. And so the benign cycle spirals ever upward until China is fully developed in some 30 years.

Actually, the subsidized trade did do some good in the first 20 years or so. It had allowed the Chinese people to see how factories are built and operated. It has also created many wealthy people who are consumers for Chinese products. But the time has come now to shift away from "subsidized" exports and expand the domestic market. By expanding China's domestic market the Chinese factories will have 1.3 billion rich consumers. Even America has only less than .3 billion consumers who are rich only because the CCP government has suppressed the value of the yuan. Therefore, it should be simple logic to see that the best prospect for Chinese factories is to expand China's own internal market.

Please go to my post at the following link and try to understand the logic of reducing the "subsidized" export while at the same time expanding the Chinese internal market by means of the urbanization of the farmers and the increase in the R&D.

http://www.network54.com/Forum/threa...&lp=1105667800

[Liang1a]

postmodern,

Your mind is primitive and your logic faulty. You write like a headless chicken with all kinds of errors. You had obviously meant that Chinese car makers cannot produce good cars untile the Chinese government allowed the importation of special steel. But you had made a typo error saying that the Chinese car makers cannot produce cars until the Chinese government "stopped" the importattion of the special steel. I had asked you for a clarification but you didn't even understand that. Your post is also full of obscenities. I had tried to read through your post but gave up a little way in because it is just a jumble of filth and not really worth my time.

[postmodern]

Chinese carmakers import special steel from South Korea to manufacture cars because we haven't the techniques to make such kind of special steel do u get me? Get this first. If u still can't, go consult Chinese carmakers.

[postmodern]

Miaowei, Dongfeng Cars General Manager, quotes from the speech "The Development Strategies of Chinese Car Industry" at PKU:
"Car assembly R&D : Car parts making R&D = 1:0.35;"
"we don't have the hierarchy of industrial structure in China;"
"we cannot produce the steel for car manufacturing(double-side zinc-cladded cold rolled steel), we usually import such steel, a car that uses 500kg steel has only 35kg domestic made steel, the rest is imported;"
"we used to import such steel from Belgium or other European countries, but now we import from Phang, South Korea;"
"Phang was founded at the same time as Baogang, both imported steel making techniques from Japan(New Nippon Steel);
"Phang vs Baogang: 27 million tons steel production vs 10 million tons steel production now;"
"painting, plastic etc. parts are worse in China;"
conclusion: "car industry is the result of integrated power of one nation;"
"we are very vexed, but we can do nothing, we cannot invest in steel making because of that."
Same as what I said except details, and I've already clarified I am not in the industry so I don't know the details.
Saying u r lack of industrial knowledge is an understatement, full of ignorance is more exact. U can NEVER run a business. U have typical American ignorance&arrogance&shamelessness so please don't butt in our Chinese business.
Your fucked up brain effected on my works too much I'm fucked up too to reply to you.

[bluebirdking]

"Lenovo buying IBM is a bad idea"
i think so！

[muchbetter]

2005-03-25 00:24:45

BEIJING, March. 25-- Lenovo Group Thursday refused to comment on news that several U.S. private equity firms were close to buying stakes in the company worth a total US$350 million.

¨Lenovo has no official comment to media on its overseas private fund raising,〃 said Guo Tongyan, Lenovoˇs spokesman in Beijing.

Guo acknowledged Lenovo was more likely to raise funds through sales of equity than through new share listings overseas.

Lenovo is expected to need more funds to cope with its US$1.75 billion purchase of International Business Machinesˇs(IBM) personal computing division.

The Wall Street Journal reported that three U.S. private-equity firms Texas Pacific Group, General Atlantic LLC and the Newbridge Capital LLC affiliate of Texas Pacific and Blum Capital Partners were close to taking a stake in Lenovo.

People familiar with the issue said the firms planned to spend about US$350 million, with Texas Pacific providing the largest stake of US$200 million, General Atlantic investing US$100 million and Newbridge Capital US$50 million.

The purchase by Lenovo of IBMˇs PC division recently won U.S. Government approval following a review by the U.S. Committee on Foreign Investment. The deal is due to be finalized by mid-year.

(Source: Shenzhen Daily/Agencies)

[deli]

good or bad buying, doesn't matter if only Lenovo is concerned. however, this may provide precious experience/reference for other chinese companies looking for new market outside china. from this point of view, i'd say it is a good buy. anyway, let's wait & see.....

[Hidden Dragon]

Lenovo's new notebook test

Click the image and click the play button for video