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Amelio, 48, has a plan to plant Lenovo firmly on two feet. The former head of Dell's Asian operations, Amelio took the helm last December, and is launching an ambitious gambit to seize international market share by expanding into every nook of the PC industry. Lenovo is introducing new products, building a complex global-distribution network and splurging on a brand-building campaign. The strategy could turn Lenovo into a far fiercer rival for Dell and HP than stately IBM was, and threatens to intensify the cutthroat competition that is a hallmark of the famously bloodthirsty PC business...
...Dell are in his world, and they have well-established sales networks, a full range of products and famous brand names, especially in the U.S. "We joke, 'Lenovo who?' The challenge is that Lenovo doesn't have a brand name in the U.S.," says Samir Bhavnani, director of research at tech-information provider Current Analysis in San Diego. Even worse, Lenovo is being buffeted by the some- times tense relations between the West and China. In May the U.S. State Department said 16,000 PCs it had purchased from Lenovo wouldn't be used for classified work after a Congressman...
Lenovo is almost as entrenched in China as the Great Wall, with more than 9,000 retail stores and other sales outlets, giving it an indisputable advantage over its competition in the world's fastest-growing economy. Lenovo owns 35% of the market, according to tech consulting firm IDC. (Dell, the largest foreign player, is No. 3, with 10%.) Chinese consider Lenovo one of the country's most trustworthy brands and a symbol of Chinese entrepreneurship...
...biggest obstacle for Lenovo's U.S. business is an inefficient supply chain. Order a computer from Dell in the U.S., and it usually arrives within 10 days. Order from Lenovo and it could come as quickly. Or you could go on vacation for a couple of weeks, and it may or may not be there when you return. "Outside of China, our supply chain is not world class," Amelio admits. To help fix the problem, he poached Dell's Gerry Smith to run supply-chain management--a Dell specialty...
Another problem: Lenovo doesn't have the financial muscle it needs to wage war with HP and Dell. In its past quarter, Lenovo earned only a $5 million net on revenues of $3.5 billion (after restructuring charges). Amelio has already cut 5% of the workforce and plans to slice $350 million from Lenovo's costs by early 2008, in part by consolidating operations, such as centralizing the global desktop team in China. The cost cuts "may be what I need to stay aggressive on pricing and not destroy my margins," he says...