10 Years Later, Looking Back at the IBM-Lenovo PC Deal

Back in 1984, as part of my consulting gig for IBM, I was asked to be part of its first laptop research program. The IBM PC had been on the market for three years by then, and many of its customers were clamoring for a more portable version of the IBM PC.

During a two-year period, I often traveled between Austin, where the laptop was being designed and Boca Raton, IBM's headquarters for the PC business, to work with the teams as they tested various models before they came up with the first clamshell-like PC that was acceptable to the market.

Over the next six years, IBM's laptop designs took advantage of newer screens, processors, and battery chemistry, and the device morphed into the first generation of the still popular ThinkPad Brand. For most of the 1990s and early 2000s, IBM had a strong PC business, and the ThinkPad was the anchor of its portable personal computer line. However, by 2004 IBM's business had changed, and it was interested in getting out of the PC hardware business. So on May 1, 2005, IBM sold this business to Lenovo and over the last 10 years Lenovo has become the No. 1 PC player in the world.

Since I was close to IBM and had been on its mobile advisory board at the time, I was invited, along with eight other analysts, to go to Beijing after the deal was announced. I met with Lenovo's management team and spoke with their executives to hear their vision for the the business.

To be honest, I was highly pessimistic about the success of this venture at first. Here was a Chinese company that was going to take over IBM's vaunted PC business and try to make it into a strong global brand. At the very least, I figured the culture clash was going to be a major issue. Also, almost all of the IBM employees moving to Lenovo were IBM lifers, and I suspected that the top talent would opt to stay at IBM instead of going with this unknown entity.

It turns out that Lenovo was able to coax most of its top execs to join the new venture. These execs helped assure IBM's corporate customers as well as any consumers who bought its products that it would be business as usual. There was an initial hiccup when the U.S. government challenged the idea that a Chinese company would have access to U.S. technology, particularly via IBM's U.S. government contracts. It took awhile but it got various governemnt approvals, and within a year the integration of IBM's PC business into Lenovo was in full swing.

In fact, how Lenovo handled the integration of this U.S. company is already a business case for how this should be done. Credit the hard work of the Chinese and U.S. teams for making this happen and for the incredible growth Lenovo has had with its PC business. The merging of these two business cultures alone is quite a feat.

One thing I did not expect is that the Chinese leadership would really take a hands-off approach to the U.S.-run PC company and fully trust its leadership to keep the business moving forward. That was one of the assurance we analysts got during our trip to Beijing, but I was not sure that would be the case. But the Chinese management put a great deal of trust in Steve Ward, the architect of the deal from IBM's side and Lenovo was able to keep all of IBM's major customers.

I recently spoke with Peter Hortensius, who is Lenovo's CTO and a senior vice president who joined Lenovo as part of the executive team that came from IBM. He told me that Lenovo's dedicated focus on delivering innovative products and being willing to branch out in new areas is key to its growth.

Recommended by Our Editors

5 Reasons Why Google Sold Motorola, and 5 Reasons Why Lenovo Bought It

Last year, it bought Motorola and IBM's server business, adding new breadth to its product offerings. Although relatively new to the smartphone wars, over the last five years, Lenovo becamse the No 3 smartphone vendor in China and No. 4 globally. It is also the No. 1 PC vendor in the world with an extremely strong position in China in business and consumer PCs.

According to Hortensius, "Lenovo is committed to creating great hardware-based products, plus a rich ecosystem that will be a driving force for their future." He pointed out that software plays a major role too, and that it plans to continue to innovate in hardware and software to help differentiate itself from the competition.

I asked Hortensius what the company would look like in another 10 years. His view is that Lenovo, under the leadership of Lenovo Chairman and CEO Yang Yuanqing, the company is poised to continue to grow in all of the categories it competes in now, and did not rule out the idea that over time it could even broaden its product portfolio.

From my experience, Lenovo is an extremely focused, highly disciplined company with a powerful leadership team that seems to all be on the same page. I have very little doubt that in the next 10 years, the company will get stronger and bigger.