Lenovo will compete in next year's Winter Olympic games in Turin, Italy, but the prize is more than a shiny medal. Lenovo plans to use the event as a launching pad for a global marketing campaign designed to spread the word of its purchase earlier this year of IBM's ( IBM) computer unit. "We believe there is no better stage to launch a brand globally than the Olympic games," said Philippe Davy, vice president of Olympic marketing for Lenovo. "
Turin will be the coming-out party for Lenovo globally." While the IBM deal vaulted Lenovo from the ninth-largest PC manufacturer in the world to the third, with just under 10% market share it ranks only fifth in the U.S. Lenovo's hope is to grow twice as fast as the overall computer market, indicating that it plans on taking significant share from much larger players like Dell ( DELL) and Hewlett-Packard ( HPQ). The push comes at a vulnerable point for the PC industry. Intense competition has eroded already thin margins for desktop computers, and it's starting to do the same for higher-margin notebook computers. Further, component prices haven't dropped as much as usual recently because of supply constraints, further squeezing the bottom lines of PC makers. Lenovo has had its own role in these forces, but company executives indicated that its real efforts in having an impact throughout the world are just beginning. From now until the start of the Olympics -- and even beyond, since Lenovo is also a prime sponsor of the 2008 Summer Olympics in Beijing -- the company will focus on building awareness of its name, reinforcing the idea that it is focused on innovation, and maintaining the IBM ThinkPad line of notebooks as a top priority. Indeed, during a conference call on Tuesday, Lenovo executives stressed that the transition incorporating IBM's products -- and people -- has gone smoother than expected. "Our retention rate is higher than when we were part of IBM," said Deepak Advani, chief marketing officer for Lenovo and the former vice president of marketing for IBM's PC unit.
With more consumers and businesses choosing notebooks over desktop computers, the ThinkPad line will be a cornerstone in Lenovo's product array if the company is to continue growing. The first ThinkPad was introduced in 1992, and it quickly became a hit with executives and business travelers, something that is still true 13 years later. "Dell and H-P may have higher profiles in the PC and laptop space among consumers certainly, but the ThinkPad has been recognized for a long time as the road-warrior machine of choice for business professionals," says Charles King, principal with Pund-IT Research and a ThinkPad user for seven years. As part of its plan to leverage brand recognition, the IBM name will remain prominent on the notebooks for 18 months before Lenovo's brand becomes more prominent. IBM and Lenovo have a five-year working agreement, which includes IBM holding a 19% stake in Lenovo. As far as the technology goes, Beijing-based Lenovo said it will continue to innovate, pointing to a ThinkPad tablet PC introduced in June as well as its development of an internal frame system to protect components. King says his own brand loyalty is strong with the ThinkPad and he hopes the brand doesn't whither under Lenovo's leadership. He cites the strong performance of IBM's hard-disk drive business following the unit's sale in 2003 to Hitachi ( HIT) as an example of an IBM product line continuing to perform after it's sold off. However, the initial sales results in the wake of the IBM acquisition suggested some pullback on the part of customers. Lenovo's global market share declined in the second quarter to 7.2% from 7.5% a year earlier, according to research firm Gartner. The decline was even more notable in the U.S., where IBM had a stronger presence, as share dropped to 3.9% from 4.7%.
That was good news for H-P, Dell and Sun Microsystems ( SUNW), each of which had harped in the deal's wake about uncertainty surrounding IBM's product line and the impact on customers. Now that Lenovo says it has fully integrated IBM's PC operations, look for it to fire a broadside on that point of view. During a difficult time when PC companies are lamenting the commoditization of the very product that was so lucrative for them during the 1980s and early 1990s, Lenovo is trying to say the PC is not dead. "PCs are too important to be just a commodity to buy," said Peter Hortensius, senior vice president of Lenovo's worldwide product development. Lenovo has a leadership position in China, but while other companies try to figure out how to sell more there, Lenovo is looking outside its home country. A strong early showing could have the company wearing gold in coming years, while its most formidable competitors, namely Dell and H-P, find themselves relegated to the lower steps of the podium.