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Lenovo Dreams of Innovation

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Yang Yuanqing may not be a born public speaker. In fact, the 46-year-old chief executive officer of Lenovo Group, China's biggest personal computer maker, still shows signs of nerves when talking to reporters or in public.

Although Yang appears to be a hesitant speaker, he is by no means slow in his thoughts or deeds. Since replacing William J. Amelio as the chief executive officer of Lenovo in February last year, Yang has not only successfully dragged the company out of the heavy losses incurred during the financial crisis but also significantly boosted the company's innovative capacity.

Earlier this year, Lenovo launched an Android-based smartphone and revealed a new tablet computer with a detachable screen. Last month, the Chinese computer vendor also set up a new firm to develop a controller-free game console called eBox, in an effort to challenge Nintendo's Wii, Microsoft's Xbox 360 and Sony's PlayStation 3 in the booming gaming market.

In an exclusive interview with China Daily, Yang said that Lenovo was unable to expand its core competitiveness in the first few years after it acquired IBM's PC unit in 2005. But he noted that the company is now ready to challenge the world's biggest PC firms such as Hewlett-Packard, Dell and Acer.

Do you have any new thoughts about Lenovo's acquisition of IBM's PC unit in the wake of the financial crisis?

Yes; always keep your core competitiveness. Actually before the acquisition of IBM's PC unit, we have already had core competitiveness, which, during the past few quarters, has proven important not only in the Chinese market but also in the rest of the world. As we didn't have any experience in the international market prior to 2005, we were unable to instantly export our strengths to other countries.

What we had to do at that time was to rely on our foreign team to ensure the operation of the newly merged firm.

Why has the integration process taken so long?

I think acquisition is a risky process. Because in 2005 we were acquiring a company that was much bigger than us, we needed to be extremely cautious. I believe that if we acquired a company now, the acquisition process would be much faster.

Lenovo's business in mature markets such as the United States and Europe has been severely impacted by the financial crisis. When do you think that part of the business will start to recover?

Actually our business has already experienced a significant recovery in those regions. If you take a look at our results for the last quarter, there has been some progress. We have greatly improved the profitability of the corporate businesses that we acquired from IBM. We also expanded our transactional business, mainly our small and medium-sized enterprises and consumer business in those mature markets. But the expansion actually dragged down our profitability there.

Is Lenovo ready to expand aggressively in mature markets?

Not exactly. We will continue to focus on emerging markets. Every firm has limited resources to support expansion so we need to know our focus. At this point in time, we don't have enough resources to support a large expansion in mature markets. So our strategy is to remain profitable in those markets. But in emerging markets, we want to take market share as fast as possible, because that is easier for us to do.

Last month, Lenovo set up a new company, eedoo, to produce game consoles. Why did you do that?

We see game consoles as a big opportunity in China. But we don't have enough resources at Lenovo Group to sustain this. We decided to spin off the business, because we have good faith in the eedoo management team and Legend Holdings also showed great interest.

Will we see Lenovo spinning off more new businesses in the future?

That's certainly something we can do. But I will be more focused on developing our core business.

What do you regard as your core businesses, especially when cell phones, netbooks and tablet computers are eroding the market share of traditional computers?

Of course personal computers are one of our core businesses. But mobile devices are also gaining momentum. In addition, Internet services and content, for both corporate users and consumers, will be our focus. We will also closely monitor the opportunities provided by the government's efforts to converge the Internet, telecom and cable networks.

Can you be more specific on the Internet services that you are interested in providing? Will they be similar to those provided by Hewlett-Packard or Dell?

No. Our strategy is to provide end-to-end solutions to our users. So our plan is to provide a platform on which third-party content providers can serve our users. We may also provide one or two key applications, but we will not provide all of the applications. Companies that do that are doomed to fail.

Lenovo's share of the global PC market reached double digits last quarter. When do you think you could become one of the top three PC players in the world?

The top three is not a high goal. I think you could see that in the near future.

Do you think new devices such as tablet computers will eventually replace traditional computers?

Computers will still be our core source of revenue. Although mobile Internet devices have great potential, they will not replace computers. Limited keyboards and screen size are major obstacles.

When will Lenovo launch its tablet computer?

LePhone is just our first product. Of course we have more in the pipeline, including tablet computers. Our upcoming products will be innovative devices with our own features.

(China Daily September 10, 2010)

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