Word: lenovo
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...turn a healthy profit. Since China joined the World Trade Organization in 2001, tariffs have plunged and foreign rivals have swarmed the country, forcing domestic firms to cut their prices. Although China's economy is still booming, prices for consumer goods actually fell 1% through October this year. Lenovo, which has been under threat domestically from Dell, has seen gross margins from its corporate PC business fall from 14.8% last year to 12.4% in the second quarter of this fiscal year. "Chinese are buying foreign companies out of desperation because of shrinking margins at home," says Arthur Kroeber, managing editor...
...American Champion Entertainment. Only later did the Chinese learn that American Champion's assets amounted to little more than a children's TV show called Adventures with Kanga Roddy. Chinese firms today still aren't rich enough to buy top-flight companies, but they do have money to spend. Lenovo earned $135 million in its last fiscal year on revenues of $3 billion, giving it the heft and confidence to believe that it's ready to compete on an even larger scale...
...Lenovo began modestly. Launched in 1984 out of a concrete bungalow, Lenovo quickly grew into China's biggest computer company, commanding just over a quarter of the domestic market today. In 2001, IBM offered to sell its PC unit to Lenovo, but the Chinese firm wasn't interested. It instead launched new lines of handheld devices and corporate services that it thought would drive profits for a decade. Last year, however, those enterprises had a loss of $29 million. The company then reversed tactics and went down-market with "village computers" selling for $350 a pop. But that didn...
...Squeezed in China, Lenovo finally began talks with IBM, and an all-night negotiating session ended last Wednesday morning when the head of the Lenovo team sent a text message reading, "Everything is O.K.," to CEO Yang Yuanqing. Yang quickly approved a deal that gives Lenovo ownership of one of the world's most trusted brands. For the next 18 months, household-name products like ThinkPad will carry IBM's name. After that they'll switch to both the Lenovo and IBM brands, and in five years "there will be no more IBM personal computers," says Yang, who will leave...
...fair, Lenovo does gain some benefits from its foray abroad. Lenovo's new CEO will be the highly regarded IBM veteran Stephen Ward, who will steer the business from Lenovo's new headquarters in Armonk, New York?a convenient location from which to target the U.S. market. The breadth of Lenovo's product line will improve, too: it will offer clients IBM's upscale laptops, in addition to its own line of cheap desktop computers. And then there's the IBM name. "They are going to ride the coattails of the IBM brand," says Bryan Ma, a Singapore-based analyst...