2 big deals take Lenovo just a week to wrap up - Omaha.com
Published Sunday, February 2, 2014 at 1:00 am / Updated at 10:55 am
2 big deals take Lenovo just a week to wrap up

The chief financial officer of Chinese technology giant Lenovo was to spend some time last month rubbing elbows with Hollywood celebrities, corporate chieftains and government leaders in Davos, Switzerland.

Instead, the executive, Wong Wai Ming, 54, was shuttling between law firm offices in frigid Manhattan, putting together two of the most transformative deals in Lenovo’s 30-year history.

In just seven days, Lenovo announced a $2.3 billion deal to buy IBM’s low-end server business and a $2.9 billion pact to acquire Motorola Mobility from Google. A delicate balancing act was required: Neither the IBM team nor the Google contingent could know what was happening.

Each acquisition alone would have been enough to occupy the attention and resources of most other technology giants. But Lenovo is a company in a hurry.

Lenovo ascended to the top tier of technology companies two years ago, surpassing Hewlett-Packard to become the world’s largest maker of personal computers. But with the PC market in decline, Lenovo had already been making drastic moves to ensure its viability.

In early 2012, Lenovo’s chief executive, Yang Yuanqing, began laying out a plan to branch out into smartphones and other devices in what the company called its “PC-plus” strategy.

With the IBM server deal, Lenovo is positioned to take on Dell and HP. Even though many companies are transitioning to higher end servers for complex tasks, the x86 servers Lenovo agreed to buy from IBM will remain in demand for years to come, generating cash flow.

And with the Motorola acquisition, Lenovo will vault into a clear No. 3 position in smartphones, behind Samsung and Apple. Lenovo’s own smartphones are already popular in China, but buying Motorola gives the company a global brand.

The voracious acquisition strategy raises questions about whether Lenovo is trying to do too much, too quickly. In the coming months, Lenovo will have to integrate the money-losing Motorola business, as well as its new servers business.

“The biggest risk is whether the executive management has the wherewithal to do a good job in the integration,” said Andrew Costello, a principal at IBB Consulting. “If they don’t, they’ll lose good people as they work to pull it all together.”

The Motorola deal has obvious risks. On Thursday, not 24 hours after the Motorola deal was announced, Google reported that Motorola had lost $384 million in the fourth quarter.

But Lenovo executives emphasize the value of the Motorola brand. And analysts agree that the deal includes other assets that could give Lenovo a better chance of challenging the top two smartphone makers.

Lenovo executives said they would retain both brand names.

“We are not restricting Lenovo to China or Motorola to the U.S.,” said Wong, the chief financial officer. “They are two different brands with different sets of propositions for the customers. The key for us is to sell more devices to the market.”

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