China’s High-Tech Hero

Liu Chuanzhi, chairman of Lenovo, clearly recalls his early tentative dealings with IBM in 1985.

Liu and a small group of researchers from the Chinese Academy of Sciences had only the year before plunged into business and wanted to sell foreign personal computers in China. “I remember the first time I took part in a meeting of IBM agents,” Liu says. “I was wearing an old business suit of my father’s and I sat in the back row. Even in my dreams, I never imagined that one day we could buy the IBM PC business. It was unthinkable. Impossible.”

But the unthinkable has happened. Lenovo has announced the acquisition of Big Blue’s iconic personal computer unit for $1.75 billion, a deal that will make it the world’s third-largest supplier of desktop PCs and laptops.

Lenovo had inauspicious beginnings. In 1984, the restless researchers raised 200,000 renminbi (about $25,000) to start their business. Their first big deal, an attempt to import color televisions, was a disaster. The group rebuilt its hopes mainly with a year of hard work conducting quality checks on PCs for new buyers. They invested money in developing a circuit board that would allow IBM PCs to process Chinese characters.

It was their breakthrough product. In 1990, they started to assemble PCs under their own Legend brand as well as selling printers for Hewlett-Packard. By 1994, Legend, which became Lenovo this year, was able to establish its own brand of PCs as its core business.

Now, however, Lenovo is taking a giant leap. Buying IBM’s PC unit will quadruple sales from 2003’s $3 billion. If Lenovo pulls it off, it could become China’s first truly global brand. “It’s as if previously we were a small boat on a river,” Liu says, “and now we’ve become a ship heading out of port.”

–Mure Dickie, Financial TimesFinancial Times