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Lenovo's coming out party
The company that bought IBM's PC business is fired up to take on big name competitors like Dell.
By Amanda Cantrell, CNNMoney.com writer

NEW YORK (CNNMoney.com) - Given the fact that all ThinkPad computers being shipped today still carry an IBM sticker, you'd be forgiven for overlooking the fact that a Chinese company is actually making and selling the machines.

Since that company, Lenovo, closed a deal to acquire IBM's (Research) personal computers business on April 30, it has kept a fairly low profile in the United States. That's about to change.

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At the 10th annual Consumer Electronics Show in Las Vegas, the company is rolling out several new products Thursday, and it's also getting ready to launch a global branding effort, starting in earnest with sponsorship of the 2006 Winter Olympics in Italy and the 2008 Olympics in Beijing.

"2006 is the coming out party for Lenovo," said Peter Hortensius, senior vice president of Lenovo's notebook business unit. "2005 was a year of integrating the business and laying the groundwork" for what is to come in 2006, he said -- which will include Lenovo-brand desktops and notebooks that don't carry the ThinkPad logo.

The company is unveiling new ThinkPad notebooks with Intel's Core chips, previously code-named "Yonah," which feature dual-core technology -- in other words, one chip with two brains. Hortensius said the new chips will give the notebooks both improved battery life and improved performance.

Lenovo is also launching two new notebooks in its X series, the X60 and the X60S, as well as the T60, the latest in its T series.

It also announced a deal with Cingular to integrate wireless wide area network technology in future versions of ThinkPad notebooks. These computers, which will debut in the second quarter, will have built-in high speed access without needing a separate PC card.

The coming-out party will include a marketing blitz that will include print and TV ads aimed at making Lenovo a recognized brand in the U.S.

"If you asked a cabdriver who Lenovo is, he wouldn't know," said Hortensius. "Our goal is to become much better known in '06."

Though the company is still not directly targeting consumers, it's focusing particularly on small businesses, a move away from IBM's strategy of focusing mainly on large, corporate customers.

Hortensius points out that where notebooks are concerned, there is often crossover between small business and consumer users, since the machines are portable between the home and the office. Its presence at a consumer-focused show reflects that cross-over appeal.

"I sell a lot of ThinkPads to consumers," noted Hortensius.

Back to retail

It's also getting back into the retail space, which IBM abandoned six years ago. It announced in November a deal with retailer Office Depot to sell ThinkPad machines in its retail business. Hortensius said the company, which has a heavy retail presence elsewhere in the world, is talking to other U.S. retailers but is not prepared to announce any new deals.

The company hired Bill Amelio away from Dell (Research) as its new CEO. Amelio, who is viewed as being largely responsible for Dell's success in Asia, could have the potential to turn Lenovo/IBM into a Dell-like company with leaner margins and better execution.

Analysts say a newly reinvigorated Lenovo means Dell, the number-one PC maker, had better keep its guard up.

"If I were Dell, I'd be worried," said Laura DiDio, an analyst for Boston-based research firm Yankee Group. "I'd expect (Lenovo) will be very aggressive and take Dell head on. I'm anticipating they are going to be a tough competitor. This is a full-court press."

Rob Enderle, who founded market research firm Enderle Group, agreed, writing recently on the Technology Pundits blog that Lenovo is "quickly becoming one of the companies to watch in the PC space." Enderle noted that now that Lenovo is out from under IBM's thumb print, it is moving to increase market share and reverse IBM's decision to exit the retail market, which he believed was a mistake.

That also goes for its rivals. One very clear sign of that is Lenovo's increasingly aggressive pricing. A recent one-day sale before Christmas featured such deals as a desktop PC with Windows XP, 2.66 gigahertz processor speed, a 40-gigabyte hard drive and an embedded CD-ROM drive for $329.

"Who can't afford that?" asked DiDio, who pointed out that the very essence of having a one-day sale underscores an attempt to appeal to not just businesses, but also the average consumer. "That's like QVC or KMart," she said of the sale.

Hortensius said the company has promotions from time to time and is able to act faster and more flexibly in running promotions than IBM was, because the company took more time to make those kinds of decisions.

So far, the acquisition has given a strong boost to Lenovo's sales.

In November, Lenovo announced its second quarter earnings, the company's first to include IBM for a full quarter. Lenovo reported revenues of HK$28.5 billion, up 404 percent from the same quarter last year, which it attributed to both the IBM acquisition as well as organic growth in emerging markets. Top of page

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